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The Container Store Group, Inc. Consolidated financial statements
As confidentially submitted to the Securities and Exchange Commission on July 12, 2013
pursuant to the Jumpstart Our Business Startups Act of 2012
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Confidential Submission on
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE CONTAINER STORE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
5719 (Primary Standard Industrial Classification Code Number) |
26-0565401 (I.R.S. Employer Identification No.) |
500 Freeport Parkway
Coppell, TX 75019
(972) 538-6000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)
William A. "Kip" Tindell, III
Chairman and Chief Executive Officer
500 Freeport Parkway
Coppell, TX 75019
(972) 538-6000
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to: | ||
Howard A. Sobel, Esq. Gregory P. Rodgers, Esq. Latham & Watkins LLP 885 Third Avenue New York, New York 10022 Telephone: (212) 906-1200 Fax: (212) 751-4864 |
Roxane F. Reardon, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017-3954 (212) 455-2000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer ý (Do not check if a smaller reporting company) |
Smaller reporting company o |
CALCULATION OF REGISTRATION FEE
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Title of each class of securities to be registered |
Proposed maximum aggregate offering price(1)(2) |
Amount of registration fee(3) |
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Common Stock, $0.01 par value per share |
$ | $ | ||
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(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes the offering price of shares of common stock that may be sold if the over-allotment option granted by the Registrant to the underwriters is exercised.
(3) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Subject to completion, dated , 2013
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Preliminary Prospectus
shares
Common stock
This is The Container Store Group, Inc.'s initial public offering. We anticipate that the initial public offering price will be between $ and $ per share. Prior to this offering, there has been no public market for our shares. After pricing this offering, we expect that the shares will trade on the New York Stock Exchange under the symbol " ."
We are an emerging growth company, as defined in Section 2(a) of the Securities Act, and will be subject to reduced public reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company.
Investing in our common stock involves risks that are described in the "Risk Factors" beginning on page 14 of this prospectus.
PRICE $ A SHARE
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Per share | Total | |||||
Public offering price |
$ | $ | |||||
Underwriting discount(1) |
$ | $ | |||||
Proceeds, before expenses, to us |
$ | $ | |||||
(1) We have agreed to reimburse the underwriters for certain expenses in connection with this offering. See "Underwriting."
We have granted the underwriters the right to purchase up to an additional shares at the initial public offering price less the underwriting discount, within 30 days from the date of this prospectus.
Delivery of the shares will be made on or about , 2013.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
J.P. Morgan | Barclays | Credit Suisse | ||
Morgan Stanley |
BofA Merrill Lynch |
The date of this prospectus is , 2013.
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As used in this prospectus, unless the context otherwise requires, references to:
You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. Neither we nor the underwriters have authorized anyone to provide you with different information. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus, or any free writing prospectus, as the case may be, or any sale of shares of our common stock.
For investors outside the United States: We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.
Our fiscal year is the 52- or 53-week period ending on the Saturday closest to February 28. Our last five completed fiscal years ended on March 2, 2013, February 25, 2012, February 26, 2011, February 27, 2010 and February 28, 2009, respectively. For ease of reference, we identify our fiscal years in this prospectus by reference to the calendar year prior to the one in which the fiscal year ends. For example, "fiscal 2012" refers to our fiscal year ended March 2, 2013. The fiscal year ended March 2, 2013 included 53 weeks, whereas the fiscal years ended February 25, 2012, February 26, 2011, February 27, 2010 and February 28, 2009 included 52 weeks. The first quarter of fiscal 2013 ended on June 1, 2013 and the first quarter of fiscal 2012 ended on May 26, 2012, and both included thirteen weeks.
Presentation of certain financial measures
Certain financial measures presented in this prospectus, such as EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, comparable store sales, average ticket, four-wall Adjusted EBITDA, four-wall Adjusted EBITDA margin, total initial cash investment, pre-tax payback period and annualized return on invested capital are not recognized under accounting principles generally accepted in the United States, which we refer to as "GAAP." We define these terms, other than EBITDA and Adjusted EBITDA, as follows:
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consider sales from that store to be comparable store sales. Net sales from our website and our call center are also included in calculations of comparable store sales.
For definitions of EBITDA and Adjusted EBITDA and reconciliations of those measures to the most directly comparable GAAP measures, see "Summary Historical Consolidated Financial and Other Data." The use of certain of these measures is also discussed under "Management's Discussion and Analysis of Financial Condition and Results of OperationsHow We Assess the Performance of Our Business."
Trademarks, trade names and service marks
This prospectus includes our trademarks, trade names and service marks, such as "The Container Store," "Contain Yourself" and "elfa," which are protected under applicable intellectual property laws and are our property. This prospectus also contains trademarks, trade names and service marks of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties' trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate is based on information from independent industry and research organizations and other third-party sources (including industry publications, surveys and forecasts), and
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management estimates. Management estimates are derived from publicly available information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on assumptions made by us upon reviewing such data and our knowledge of such industry and markets, which we believe to be reasonable. Although we believe the data from these third-party sources is reliable, we have not independently verified any third-party information. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in "Risk Factors." These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
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This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the "Risk Factors" section beginning on page 14 and our consolidated financial statements and the related notes appearing at the end of this prospectus, before making an investment decision.
Company overview
We are the leading specialty retailer of storage and organization products in the United States, with over $700 million of net sales in fiscal 2012. We are the original storage and organization specialty retailer and the only national retailer solely devoted to the category. Our goal is to help provide order to an increasingly busy and chaotic world. We provide creative, multifunctional, customizable storage and organization solutions that help our customers save time, save space and improve the quality of their lives. We believe our commitment to the category, breadth of product assortment, passionate employees and focus on solutions-based selling create a long-lasting bond with our customers and foster devotion to The Container Store brand. As a result, we continue to expand our base of passionate, enthusiastic and loyal customers, which we believe will further drive our growth and profitability.
We foster an employee-first culture built around our Foundation Principles, which are described on the inside front cover of this prospectus and in the letter from William A. "Kip" Tindell, III, our Chairman and Chief Executive Officer, to prospective shareholders appearing on page 78. The Foundation Principles define how we approach our relationships with our employees, vendors, customers and communities and influence every aspect of our business.
Our business was established with one store in Dallas, Texas in 1978. Today our operations consist of two reporting segments:
As of July 1, 2013, we operated 61 stores with an average size of approximately 19,000 selling square feet in 22 states and the District of Columbia. In fiscal 2012, our TCS net sales were derived from approximately 10,500 unique stock keeping units ("SKUs") organized into 16 distinct lifestyle departments sourced from approximately 700 vendors around the world. The breadth, depth and quality of our product offerings are designed to appeal to a broad demographic, including our core customers, who are predominantly female, affluent, highly educated and busy.
The passion and dedication of our employees, management team and vendor network allows us to successfully execute our business strategy. We believe our culture and conscious business approach ultimately drive our strong financial performance, as demonstrated by:
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Our competitive strengths
Deep-rooted, employee-first culture. We believe our highly-trained, experienced and motivated employees are critical to delivering our solutions-based retail experience to our customers. Taking care of our employees is The Container Store's top priority, so we continually invest in their recruitment, training and overall job satisfaction. We believe that these investments result in high employee retention rates, inspired service and an enhanced customer experience that differentiates us from other retailers.
We are highly selective in our hiring process, typically hiring less than 4% of annual applicants, and often our new employees are existing customers. We train our employees extensively and continuously throughout their employment. Each new full-time store employee receives more than 260 hours of formal training in their first year alone, which we believe to be far beyond the industry average. Training focuses on our culture, leadership skills, product knowledge, space design skills and operational skills. In addition, we offer flexible work schedules, comprehensive benefits and above industry average compensation to both full and part-time employees. As a result, we have an average full-time employee turn-over rate of approximately 10% annually, compared to an industry average of over 100%, and we have been recognized in FORTUNE Magazine's list of "100 Best Companies To Work For®" in each of the last 14 years.
An unmatched collection of storage and organization products. We offer our customers storage and organization solutions through an extensive and carefully curated assortment of creative and original products at competitive prices. We accomplish this in three principal ways:
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department represented approximately $141 million, or approximately 23%, of TCS net sales, which included approximately $106 million of elfa® Custom Design Center net sales with an average ticket of $583.01. This compares to an average ticket for the entire TCS segment of $57.34.
Highly-differentiated shopping experience. We place great emphasis on creating an inviting and engaging store experience. Our customers often come to The Container Store knowing that they have a storage and organization challenge, but without a clear plan of how to address and solve their underlying issue. Our highly-trained salespeople seek to interact with our customers, asking questions, listening and learning from them so that they can understand the complete scope of their needs. This allows us to provide our customers with creative, tailored, comprehensive and multifunctional solutions, often utilizing multiple products from many of the 16 distinct lifestyle departments in our stores. This selling approach allows us to sell a broader range of products and to deliver a differentiated experience to our customers, which we believe results in a higher average ticket, repeat visits and frequent referrals to other potential customers.
Our interactive customer service experience is further enhanced by a variety of additional service offerings, including our elfa® Installation Service, GoShop! Click & Pickup (in which a customer orders online and picks up at a store with curbside delivery to the customer's car in most markets) and GoShop! Scan & Deliver in the Manhattan market (in which a customer simply scans her products with a hand-held device, checks out, after which the merchandise is delivered to her home). These services and, in the case of GoShop! Click & Pickup and GoShop! Scan & Deliver, advanced technologies, provide additional convenience and flexibility to our customers and reinforce our commitment to providing a differentiated shopping experience.
Proven real estate site selection process. We seek to locate our stores in highly desirable retail developments surrounded by dense concentrations of our core customers. We maintain a disciplined approach to new store development and perform comprehensive market research before selecting a new site based on customer demographics from eSite, an independent customer analytics research firm, and data from our customer database to identify existing customers. Additionally, we maintain a flexible cost structure that allows us to achieve consistent four-wall Adjusted EBITDA margins across a range of store sales volumes and successfully operate stores in a variety of markets. Our data-driven approach, premium locations and flexible new store model have resulted in strong performance across our store base. We have never closed a store due to underperformance.
We have deep relationships with best-in-class commercial real estate firms and believe that we are a sought-after tenant given our brand and the high volume of affluent customers that visit our stores. As a result, we continue to have access to desirable retail sites on attractive terms.
Powerful brand with strong customer loyalty. We believe that The Container Store brand has become synonymous with the storage and organization category and an organized, stress-reduced lifestyle. The strength of our brand is built on our history as the originator and leader of the storage and organization category, our best-in-class product offerings and our commitment to our employees, vendors, customers and communities. We believe that this makes us the preferred retail destination for storage and organization solutions.
We have achieved nationwide recognition attributable in part to numerous news and media impressions. We are consistently presented with opportunities to showcase our brand on a national stage. Notable publicity includes appearances on "Oprah's Favorite Things" in her farewell season in 2010 and on "Ellen's 12 Days of Christmas" in 2012. In addition, we received the National Retail Federation's Gold Medal Award for excellence in 2011. The prominence of our brand has also led to a significant number of unpaid media impressions, including print mentions in newspapers and magazines with more than 520 million readers
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and television broadcast mentions on shows with more than 270 million viewers in 2012. We also enjoy a strong following on various social media outlets including Facebook (over 200,000 "likes"), Twitter (over 20,000 followers) and Pinterest (over 22,000 followers), in each case as of July 1, 2013.
Highly experienced and passionate management team with proven track record. Led by our Chairman and Chief Executive Officer, William A. "Kip" Tindell, III, our senior management team averages over 19 years with The Container Store, and is responsible for our proven track record of growth and consistent performance. Both Kip and Sharon Tindell, our Chief Merchandising Officer, have been inducted into the Retailing Hall of Fame. Melissa Reiff, our President and Chief Operating Officer, joined the team in 1995 and has been instrumental in elevating and leading the organization through its sizable expansion over the past two decades. Kip, Sharon, Melissa and the rest of the management team are dedicated to maintaining our employee-first culture and crafting mutually beneficial relationships with all of our stakeholders, which we believe will lead to continued growth and value creation in the future.
Our growth strategy
The key elements of our growth strategy include:
Expanding our store base. We believe that our expansion opportunities in the United States are significant. Our current footprint of 61 stores extends to 22 states and the District of Columbia. We expect to open six new stores during fiscal 2013 (including one store relocation), three of which have already opened, and an additional six new stores in fiscal 2014 (including one store relocation). Based on research conducted for us by eSite, we believe that we can grow our current U.S. store footprint to at least 300 stores in our current format. We have adopted a disciplined expansion strategy designed to leverage the strength of our business model and nationally recognized brand name to successfully develop new stores in an array of markets that are primed for growth, including new, existing, small and large markets. While our current expansion focus is on domestic markets, we believe international expansion may provide additional growth opportunities for us in the future.
Historically, our new store openings have been highly successful due in part to our new store opening execution strategy, which involves months of hiring, training and preparation and culminates in a multi-day grand opening celebration in partnership with a local charity. This distinctive approach enables our new stores to deliver strong sales volumes quickly and results in shorter new store pre-tax payback periods. The average four-wall Adjusted EBITDA margin was 21.5% in the first twelve months of operation and the average pre-tax payback period was approximately 2.5 years for our 12 new stores that opened from fiscal 2008 through fiscal 2011.
Driving comparable store sales growth. We have achieved positive comparable store sales growth in each of the past twelve fiscal quarters (through May 2013) and have increased our average ticket by 7.5% during the same period. We believe that we can continue to grow our comparable store sales by driving store traffic, improving customer conversion and growing our average ticket by continuing to provide a differentiated shopping experience through our solutions-based selling approach, new product and service introductions and well-maintained stores. Our employees receive continuous training on our products to ensure that our customers are sold complete solutions rather than individual products. We also believe that our high levels of service will continue to drive increased sales of products in our higher margin elfa® department and complete space design solutions. We believe that these factors, combined with our continuous focus on further increasing brand awareness, will attract new customers and increase loyalty with existing customers.
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Enhancing and growing multi-channel presence. In addition to our retail stores, we also offer our products directly to our customers through our fully-integrated website and call center, which collectively accounted for 5.4% of TCS net sales in fiscal 2012. Through continual technology enhancements and innovative services, such as GoShop! Click & Pickup, we believe we are well positioned for continued growth in our direct sales channels. Our website and call center sales have increased 84% from fiscal 2008 to fiscal 2012, including 25% growth in fiscal 2012.
Increasing brand awareness. We will continue to promote our brand by constantly communicating our message of organized and stress-reduced living to our current and potential customers. We do this through our comprehensive marketing strategy, which includes direct mail, advertising, online, public relations and social media. Our Customer Relationship Management ("CRM") strategy allows us to target our marketing efforts through direct mail and email. This strategy is supported by our customer database of over 14 million customer households, which includes customer transaction data and demographic overlays that help us better understand customer behaviors and identify opportunities. Additionally, our marketing and brand building efforts are enhanced by an on-going dialogue with our customers through growing social and mobile channels including Facebook, Twitter, Pinterest and Instagram.
As a part of our commitment to Conscious Capitalism®, we focus on serving the local communities in which we operate. We provide donations, gift cards and storage and organization makeovers to a variety of local non-profit organizations to show our support for the organizations that are important to our customers. Additionally, when opening each new store, we partner with a prominent local non-profit organization, working together to welcome the new store to the community. We host a grand opening party on the Thursday night before the Saturday on which the store opens, and donate 10% of our initial Saturday and Sunday sales from that new store to our non-profit partner. As we continue to grow our store base, we plan to continue our active partnerships with local non-profit organizations in order to build a sense of community with our customers and promote The Container Store brand.
Improving profitability. We believe that the expected expansion of our store base and the expected growth in comparable store sales will result in improved Adjusted EBITDA margins as we take advantage of economies of scale in product sourcing and leverage our existing infrastructure, supply chain, corporate overhead and other fixed costs. We also expect to maintain our disciplined pricing approach, which involves strategic promotional campaigns with limited use of traditional markdowns or discounting.
Our market
We operate within the storage and organization category, which extends across many retail segments including housewares, office supplies and travel, among others. This category is highly fragmented and The Container Store is the only national retailer solely devoted to it. We believe the category is growing and will continue to grow due, in part, to several favorable demographic trends, including (1) the desire for efficiency and organization of Baby Boomers as they become "empty nesters," (2) the generation of Baby Boomers' children driving demand for organizational products as they move into their first homes and (3) the increase of dual-income families with a need for solutions to organize and simplify their busy lives. Given The Container Store's industry leadership, unmatched product assortment, excellent customer service and national footprint, we believe we are well positioned to increase our share of this growing category.
Summary risk factors
We are subject to a number of risks, including risks that may prevent us from achieving our business objectives or that may adversely affect our business, financial condition, results of operations, cash flows
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and prospects. You should carefully consider the following risks, including the risks discussed in the section entitled "Risk Factors," before investing in our common stock:
Dividend and exchange of preferred stock
Upon the closing of this offering, a dividend in the aggregate amount of $ million, which we refer to collectively as the "Dividend," will be paid from the proceeds of this offering as follows: (i) first, on a pro rata basis to the holders of our senior preferred stock, which will reduce the liquidation preference of each such share of our senior preferred stock until such liquidation preference has been reduced to $1,000.00 per share and (ii) second, the remainder of such $ million on a pro rata basis to the holders of our junior preferred stock, which will reduce the liquidation preference of each such share of our junior preferred stock. Immediately following the payment of the Dividend, we will exchange each outstanding share of our senior and junior preferred stock for a number of shares of common stock determined by dividing (a) the liquidation preference amount of such preferred stock by (b) the initial public offering price in this offering, net of the underwriting discount and a pro rata portion, based upon the number of shares being sold in this offering, of the estimated offering-related expenses incurred by us. As of July 1, 2013, on an as adjusted basis to give effect to the reduction resulting from the Dividend, the liquidation preference per share of our senior preferred stock would have been $1,000.00 and the liquidation preference per share of our junior preferred stock would have been $ . For more information, see "The Exchange."
Principal equity holders
Upon the closing of this offering and after giving effect to the Exchange, funds affiliated with LGP will collectively hold approximately shares, or %, of our outstanding common stock. Founded in 1989, LGP is one of the nation's leading private equity firms with approximately $15 billion in equity capital under management. Based in Los Angeles, LGP has invested in over 65 companies, targeting investments in established companies that are leaders in their markets with strong management teams. LGP has extensive experience investing in retail companies, including investments in Whole Foods Market, J. Crew, PETCO Animal Supplies, BJ's Wholesale Club, Topshop, David's Bridal, Leslie's Poolmart, Jo-Ann Stores, Sports Authority, Savers, Neiman Marcus Group, Tourneau, Jetro Cash & Carry and The Tire Rack.
Upon the closing of this offering and after giving effect to the Exchange, Kip Tindell, our Chairman and Chief Executive Officer, his wife, Sharon Tindell, our Chief Merchandising Officer, and Melissa Reiff, our President and Chief Operating Officer, will collectively hold approximately shares, or % of our outstanding common stock.
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Corporate information
The Container Store Group, Inc. (f/k/a TCS Holdings, Inc.), the issuer of the common stock in this offering, was incorporated as a Delaware corporation on June 29, 2007 for the purpose of acquiring our wholly owned subsidiary, The Container Store, Inc. Our corporate headquarters are located at 500 Freeport Parkway, Coppell, TX 75019. Our telephone number is (972) 538-6000. Our principal website address is www.containerstore.com. The information on any of our websites is deemed not to be incorporated in this prospectus or to be part of this prospectus.
Implications of being an emerging growth company
We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis (CD&A) of our executive compensation programs in this prospectus. In addition, for so long as we are an emerging growth company, we will not be required to:
While we are an emerging growth company, Section 107(b) of the JOBS Act would also permit us to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have irrevocably elected not to take advantage of this accommodation.
We will remain an emerging growth company until the earliest to occur of:
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Common stock offered by us | shares. | |
Underwriters' option to purchase additional shares of common stock from us |
shares. |
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Common stock to be outstanding after this offering |
shares (or shares if the underwriters exercise their option to purchase additional shares in full). |
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In this prospectus, we have calculated the number of shares of common stock to be issued pursuant to the Exchange using the liquidation preference of the shares of our preferred stock as of July 1, 2013. Accordingly, such number does not take into account shares of common stock to be issued in the Exchange in satisfaction of the accrued liquidation preference on our preferred stock on or after July 1, 2013 and to, but excluding, the closing date of this offering. Such liquidation preference will accrue at a rate of $242,311.28 per day in the aggregate (which would be exchanged in the Exchange for approximately shares of our common stock per day). Such accrual of the liquidation preference compounds on a quarterly basis, and as a result, the rate of accrual will increase on the first day of the next calendar quarter. For more information, please see "Use of Proceeds" and "The Exchange" elsewhere in this prospectus. |
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For additional information regarding the impact of a change in the assumed initial public offering price and/or the actual closing date of this offering on the number of shares outstanding after the closing of this offering related to the exchange of our preferred stock, see "The Exchange." |
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Use of proceeds |
We estimate that the net proceeds to us from this offering, after deducting the underwriting discount and estimated offering expenses, will be approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares in full), assuming the shares are offered at $ per share (the midpoint of the estimated price range set forth on the cover of this prospectus). |
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We intend to use the net proceeds that we receive from this offering as follows: |
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$ million will be applied: (i) first, to pay a dividend to holders of our senior preferred stock, which will reduce the liquidation preference of such shares until such liquidation preference is reduced to $1,000.00 per share and (ii) second, to pay the remainder of such $ million as a dividend to holders of our junior preferred stock, which will reduce the liquidation preference of such shares (see "Dividend and Exchange of Preferred Stock" above); and |
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$ million of the net proceeds will be applied to repay a portion of the outstanding borrowings under the Senior Secured Term Loan Facility (as such term is defined under "Description of Indebtedness"). If the underwriters exercise their option to purchase additional shares, we intend to use the net proceeds that we receive to repay an additional portion of the outstanding borrowings under the Senior Secured Term Loan Facility. |
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Directed share program |
The underwriters have reserved for sale, at the initial public offering price, up to approximately shares of our common stock being offered for sale to our directors, officers and certain employees and other parties related to the Company. We will offer these shares to the extent permitted under applicable regulations. The number of shares available for sale to the general public in this offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not purchased will be offered by the underwriters to the general public on the same terms as the other shares. |
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Controlled company |
Upon the closing of this offering and after giving effect to the Exchange, LGP will own approximately shares, or %, of our outstanding common stock. As a result, we will be a "controlled company" within the meaning of the listing rules, and therefore will be exempt from certain of the corporate governance listing requirements, of the New York Stock Exchange. See "ManagementCorporate Governance." |
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Dividend policy |
We currently intend to retain all available funds and any future earnings for use in the operation of our business, and therefore we do not currently expect to pay any cash dividends. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, capital requirements and other factors that our board of directors deems relevant. We are a holding company, and substantially all of our operations are carried out by our subsidiary, The Container Store, Inc., and its subsidiaries. The Container Store, Inc.'s ability to pay dividends to us is limited by the Revolving Credit Facility (as such term is defined under "Description of Indebtedness") and the Senior Secured Term Loan Facility, which may in turn limit our ability to pay dividends on our common stock. Our ability to pay dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred equity securities of ours or of our subsidiaries. |
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Risk factors |
Investing in shares of our common stock involves a high degree of risk. See "Risk Factors" beginning on page 14 of this prospectus for a discussion of factors you should carefully consider before investing in shares of our common stock. |
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Proposed New York Stock Exchange symbol |
" " |
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In this prospectus, the number of shares of our common stock to be outstanding after this offering is based on the number of shares of our common stock and our preferred stock outstanding as of July 1, 2013, and excludes:
Unless otherwise indicated, this prospectus reflects and assumes the following:
See "The Exchange" for a discussion of the impact of the initial public offering price and the actual closing date of this offering on the number of shares of common stock outstanding following the offering.
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Summary historical consolidated financial and operating data
The following tables summarize our financial data as of the dates and for the periods indicated. We have derived the consolidated statement of operations data and consolidated balance sheet data for the fiscal years ended February 26, 2011, February 25, 2012, and March 2, 2013 from our audited consolidated financial statements for such years and for the thirteen weeks ended May 26, 2012 and June 1, 2013 from our unaudited consolidated financial statements for such periods. Our audited consolidated financial statements as of February 25, 2012 and March 2, 2013 and for the fiscal years ended February 26, 2011, February 25, 2012 and March 2, 2013 have been included in this prospectus. Our unaudited consolidated financial statements as of June 1, 2013 and for the thirteen weeks ended May 26, 2012 and June 1, 2013 have been included in this prospectus and, in the opinion of management, include all adjustments (inclusive only of normally recurring adjustments) necessary for a fair presentation. Historical results are not indicative of the results to be expected in the future and results of operations for an interim period are not necessarily indicative of results for a full year. The fiscal year ended March 2, 2013 included 53 weeks, whereas the fiscal years ended February 25, 2012 and February 26, 2011 included 52 weeks. Line items that are only applicable to our TCS segment are noted with (*) and to our Elfa segment with (+). For segment data, see Note 14 to our consolidated financial statements.
You should read the following information together with the more detailed information contained in "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.
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Fiscal year ended | Thirteen weeks ended | ||||||||||||||
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(in thousands) |
February 26, 2011 |
February 25, 2012 |
March 2, 2013 |
May 26, 2012 |
June 1, 2013 |
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Consolidated statement of operations data: |
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Net sales |
$ | 568,820 | $ | 633,619 | $ | 706,757 | $ | 145,755 | $ | 159,645 | ||||||
Cost of sales (excluding depreciation and amortization) |
235,295 | 266,355 | 291,146 | 61,578 | 66,441 | |||||||||||
Gross profit |
333,525 | 367,264 | 415,611 | 84,177 | 93,204 | |||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization) |
269,474 | 293,665 | 331,380 | 76,500 | 83,807 | |||||||||||
Pre-opening costs* |
1,747 | 5,203 | 7,562 | 1,661 | 1,962 | |||||||||||
Goodwill and trade name impairment+ |
52,388 | 47,037 | 15,533 | | | |||||||||||
Depreciation and amortization |
24,354 | 27,451 | 29,550 | 7,254 | 7,470 | |||||||||||
Restructuring charges+ |
341 | 133 | 6,369 | 494 | 241 | |||||||||||
Other expenses |
| 193 | 987 | 247 | 219 | |||||||||||
Loss on disposal of assets |
139 | 210 | 88 | 111 | 22 | |||||||||||
Income (loss) from operations |
(14,918 | ) | (6,628 | ) | 24,142 | (2,090 | ) | (517 | ) | |||||||
Interest expense |
26,006 | 25,417 | 21,388 | 5,798 | 5,555 | |||||||||||
Loss on extinguishment of debt* |
| | 7,333 | 7,236 | 1,101 | |||||||||||
Loss before taxes |
(40,924 | ) | (32,045 | ) | (4,579 | ) | (15,124 | ) | (7,173 | ) | ||||||
Provision (benefit) for income taxes(1) |
4,129 | (1,374 | ) | (4,449 | ) | (3,160 | ) | (1,844 | ) | |||||||
Net loss |
$ | (45,053 | ) | $ | (30,671 | ) | $ | (130 | ) | $ | (11,964 | ) | $ | (5,329 | ) | |
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As of | |
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(in thousands) |
February 26, 2011 |
February 25, 2012 |
March 2, 2013 |
June 1, 2013 |
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Consolidated balance sheet data: |
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Cash and cash equivalents |
$ | 49,756 | $ | 51,163 | $ | 25,351 | $ | 13,703 | ||||||||
Working capital(2) |
21,341 | 21,367 | 22,557 | 30,970 | ||||||||||||
Total assets |
773,303 | 746,678 | 752,820 | 743,037 | ||||||||||||
Long-term debt(3) |
300,893 | 300,166 | 285,371 | 377,871 | ||||||||||||
Total stockholders' equity |
268,227 | 232,989 | 233,375 | 135,274 | ||||||||||||
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Fiscal year | Fiscal quarter | ||||||||||||||
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February 26, 2011 |
February 25, 2012 |
March 2, 2013 |
May 26, 2012 |
June 1, 2013 |
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Other financial data: |
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Adjusted EBITDA (in thousands)(4) |
$ | 67,707 | $ | 75,644 | $ | 87,585 | $ | 8,257 | $ | 10,233 | ||||||
Adjusted EBITDA margin(5) |
11.9% | 11.9% | 12.4% | 5.7% | 6.4% | |||||||||||
Comparable store sales growth for the period*(6) |
8.1% | 7.6% | 4.4% | 6.0% | 2.7% | |||||||||||
Number of stores open at end of period* |
49 | 53 | 58 | 55 | 60 | |||||||||||
Average ticket*(7) |
$ | 53.68 | $ | 55.60 | $ | 57.34 | $ | 53.03 | $ | 56.04 | ||||||
(1) The difference between our effective tax rate and the statutory Federal tax rate is predominantly related to fluctuations in the valuation allowance recorded against net deferred assets not expected to be realized, the effects of foreign income taxed at a different rate and intraperiod tax allocations between continuing operations and other comprehensive income.
(2) Working capital is defined as current assets (excluding cash and cash equivalents) less current liabilities (excluding the current portion of long-term debt and revolving lines of credit).
(3) Long-term debt consists of the current and long-term portions of the Senior Secured Term Loan Facility, the Elfa Term Loan Facility and other mortgages and loans.
(4) EBITDA and Adjusted EBITDA have been presented in this prospectus as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as net income before interest, taxes, depreciation, and amortization. Adjusted EBITDA is calculated in accordance with the Secured Term Loan Facility and the Revolving Credit Facility and is the basis for performance evaluation under our executive compensation programs. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance from period to period as discussed further below.
EBITDA and Adjusted EBITDA are included in this prospectus because they are key metrics used by management, our board of directors and LGP to assess our financial performance. EBITDA and Adjusted EBITDA are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. In addition to covenant compliance and executive performance evaluations, we use Adjusted EBITDA to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.
EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity and should not be considered as alternatives to net income (loss) as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures, store openings and certain other cash costs that may recur in the future. EBITDA and Adjusted EBITDA contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as pre-opening costs, stock compensation expense, and losses on extinguishment of debt. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using EBITDA and Adjusted EBITDA supplementally. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
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A reconciliation of net loss to EBITDA and Adjusted EBITDA is set forth below:
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Fiscal year ended | Thirteen weeks ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
February 26, 2011 |
February 25, 2012 |
March 2, 2013 |
May 26, 2012 |
June 1, 2013 |
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Net loss |
$ | (45,053 | ) | $ | (30,671 | ) | $ | (130 | ) | $ | (11,964 | ) | $ | (5,329 | ) | |
Depreciation and amortization |
24,354 | 27,451 | 29,550 | 7,254 | 7,470 | |||||||||||
Interest expense |
26,006 | 25,417 | 21,388 | 5,798 | 5,555 | |||||||||||
Income tax expense (benefit) |
4,129 | (1,374 | ) | (4,449 | ) | (3,160 | ) | (1,844 | ) | |||||||
EBITDA |
9,436 | 20,823 | 46,359 | (2,072 | ) | 5,852 | ||||||||||
Management fees(a) |
| 500 | 1,000 | 250 | 250 | |||||||||||
Pre-opening costs*(b) |
1,747 | 5,000 | 7,562 | 1,661 | 1,962 | |||||||||||
Goodwill and trade name impairment+(c) |
52,388 | 47,037 | 15,533 | | | |||||||||||
Non-cash rent(d) |
2,442 | 1,935 | 2,014 | 442 | 391 | |||||||||||
Restructuring charges+(e) |
341 | 133 | 6,369 | 494 | 241 | |||||||||||
Stock compensation expense(f) |
| | 283 | | 99 | |||||||||||
Loss on extinguishment of debt*(g) |
| | 7,333 | 7,236 | 1,101 | |||||||||||
Foreign exchange (gains) losses(h) |
1,269 | (66 | ) | 55 | (15 | ) | 94 | |||||||||
Other adjustments(i) |
84 | 282 | 1,077 | 261 | 243 | |||||||||||
Adjusted EBITDA |
$ | 67,707 | $ | 75,644 | $ | 87,585 | $ | 8,257 | $ | 10,233 | ||||||
(a) Fees paid to LGP in accordance with our management services agreement, which will terminate on the closing of this offering.
(b) Non-capital expenditures associated with opening new stores and relocating stores. Prior to fiscal 2012, the amount of pre-opening costs permitted pursuant to the terms of the Revolving Credit Facility and the Senior Secured Term Loan Facility to be included in the calculation of Adjusted EBITDA was limited to $5.0 million, and the limit was increased to $10.0 million in April 2012. Similar limits exist in our compensation plan. We adjust for these costs to facilitate comparisons of our performance from period to period.
(c) Non-cash charges related to impairment of intangible assets, related to Elfa, which we do not consider in our evaluation of ongoing performance.
(d) Reflects the extent to which our annual GAAP rent expense has been above or below our cash rent payments due to lease accounting adjustments. The adjustment varies depending on the average age of our lease portfolio (weighted for size), as our GAAP rent expense on younger leases typically exceeds our cash cost, while our GAAP rent expense on older leases is typically less than our cash cost. Although our GAAP rent expense has exceeded our cash rent payments through our last fiscal year, as our lease portfolio matures we expect our cash rent payments to exceed our GAAP rent expense, beginning in fiscal 2013.
(e) Includes charges incurred to restructure business operations at Elfa, including the sale of a subsidiary in Germany and a manufacturing facility in Norway in fiscal 2012, as well as the relocation of certain head office functions in sales and marketing from the Västervik, Sweden, manufacturing location to the group headquarters in Malmö, Sweden in fiscal 2012, which we do not consider in our evaluation of ongoing performance.
(f) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on timing of awards. We adjust for these charges to facilitate comparisons from period to period.
(g) Loss recorded as a result of the repayment of then outstanding term loan facility and senior subordinated notes in April 2012, which we do not consider in our evaluation of our ongoing operations, and the April 2013 amendment to the Senior Secured Term Loan Facility. We expect to incur a charge in connection with our repayment of a portion of the borrowings under the Senior Secured Term Loan Facility with a portion of the net proceeds of this offering.
(h) Realized foreign exchange transactional gains/losses.
(i) Other adjustments include amounts our management does not consider in our evaluation of ongoing operations, including costs incurred in preparations for this offering and other charges.
(5) Adjusted EBITDA margin means, for any period, the Adjusted EBITDA for that period divided by the net sales for that period.
(6) A store is included in the comparable store sales calculation on the first day of the sixteenth full month following the store's opening. When a store is relocated, we continue to consider sales from that store to be comparable store sales. Net sales from our website and call center are also included in calculations of comparable store sales.
(7) Average ticket for any period is calculated by dividing (a) net sales of merchandise by our TCS segment (or, if average ticket is being calculated with respect to the elfa® Custom Design Center, the net sales of merchandise from the elfa® Custom Design Center) for that period (regardless of whether such net sales are included in comparable store sales for such period) by (b) the number of transactions for that period comprising such net sales.
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You should carefully consider the risks described below, together with all of the other information included in this prospectus, before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks or uncertainties. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks related to our business
An overall decline in the health of the economy and consumer spending may affect consumer purchases of discretionary items, which could reduce demand for our products and materially harm our sales, profitability and financial condition.
Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer spending generally and for discretionary items in particular. Factors influencing consumer spending include general economic conditions, consumer disposable income, fuel prices, recession and fears of recession, unemployment, war and fears of war, inclement weather, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, sales tax rates and rate increases, inflation, consumer confidence in future economic conditions and political conditions, and consumer perceptions of personal well-being and security. For example, the 2008-2009 economic downturn led to decreased discretionary spending, which adversely impacted our business and resulted in declining sales trends. In addition, a decrease in home purchases has led and may continue to lead to decreased consumer spending on home-related products. Prolonged or pervasive economic downturns could slow the pace of new store openings or cause current stores to close. Adverse changes in factors affecting discretionary consumer spending have reduced and may continue to further reduce consumer demand for our products, thus reducing our sales and harming our business and operating results. In particular, consumer purchases of discretionary items, such as our elfa® closet systems, tend to decline during recessionary periods when disposable income is lower.
Costs and risks relating to new store openings could severely limit our growth opportunities.
Our growth strategy depends on opening stores in new and existing markets. We must successfully choose store sites, execute favorable real estate transactions on terms that are acceptable to us, hire competent personnel and effectively open and operate these new stores. Our plans to increase our number of retail stores will depend in part on the availability of existing retail stores or store sites. A lack of available financing on terms acceptable to real estate developers or a tightening credit market may adversely affect the number or quality of retail sites available to us. We cannot assure you that stores or sites will be available to us, or that they will be available on terms acceptable to us. If additional retail store sites are unavailable on acceptable terms, we may not be able to carry out a significant part of our growth strategy.
If we are unable to source and market new products to meet our high standards and customer preferences or are unable to offer our customers an aesthetically pleasing shopping environment, our results of operations may be adversely affected.
Our success depends on our ability to source and market new products that both meet our standards for quality and appeal to customers' preferences. A small number of our employees, including our buying team, are primarily responsible for both sourcing products that meet our high specifications and identifying and responding to changing customer preferences. Failure to source and market such products, or to accurately forecast changing customer preferences, could lead to a decrease in the number of customer transactions at our stores and a decrease in the amount customers spend when they visit our stores. In addition, the sourcing of our products is dependent, in part, on our relationships with our vendors. If we
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are unable to maintain these relationships we may not be able to continue to source products at competitive prices that both meet our standards and appeal to our customers. We also attempt to create a pleasant and appealing shopping experience. If we are not successful in creating a pleasant and appealing shopping experience we may lose customers. If we do not succeed in introducing and sourcing new products that consumers want to buy or maintaining good relationships with our vendors, or are unable to provide a pleasant and appealing shopping environment or maintain our level of customer service, our sales, operating margins and market share may decrease, which would adversely impact our business, financial condition and results of operations.
We have experienced net losses in the past and we may experience net losses in the future.
We experienced net losses of $45.1 million, $30.7 million and $0.1 million in fiscal 2010, fiscal 2011 and fiscal 2012, respectively. These net losses are inclusive of intangible asset impairments at our Elfa segment in the amounts of $52.4 million, $47.0 million, $15.5 million in fiscal 2010, fiscal 2011 and fiscal 2012, respectively. We may experience net losses in the future, and we cannot assure you that we will achieve profitability in future periods.
We depend on a single distribution center for all of our stores.
We handle merchandise distribution for all 61 stores from a single facility in Coppell, Texas, a suburb of Dallas, Texas. We use independent third party transportation companies as well as leased trucks to deliver our merchandise to our stores and our clients. Any significant interruption in the operation of our distribution center or the domestic transportation infrastructure due to natural disasters, accidents, inclement weather, system failures, work stoppages, slowdowns or strikes by employees of the transportation companies, or other causes could delay or impair our ability to distribute merchandise to our stores, which could result in lower sales, a loss of loyalty to our brands and excess inventory and would have a material adverse effect on our business, financial condition and results of operations. Our business depends upon the successful operation of our distribution center, as well as our ability to fulfill orders and to deliver our merchandise to our customers in a timely manner.
Our facilities and systems, as well as those of our vendors, are vulnerable to natural disasters and other unexpected events, and as a result we may lose merchandise and be unable to effectively deliver it to our stores and result in delay shipments to our online customers.
Our retail stores, corporate offices, distribution center, infrastructure projects and direct-to-customer operations, as well as the operations of our vendors from which we receive goods and services, are vulnerable to damage from earthquakes, tornadoes, hurricanes, fires, floods, power losses, telecommunications failures, hardware and software failures, computer viruses and similar events. If any of these events result in damage to our facilities or systems, or those of our vendors, we may experience interruptions in our business until the damage is repaired, resulting in the potential loss of customers and revenues. In addition, we may incur costs in repairing any damage beyond our applicable insurance coverage.
We rely upon independent third-party transportation providers for substantially all of our product shipments and are subject to increased shipping costs as well as the potential inability of our third-party transportation providers to deliver on a timely basis.
We currently rely upon independent third-party transportation providers for substantially all of our product shipments, including shipments to and from all of our stores. Our utilization of these delivery services for shipments is subject to risks, including increases in fuel prices, which would increase our shipping costs, and employee strikes and inclement weather which may impact a shipping company's ability to provide delivery services that adequately meet our shipping needs. If we change the shipping companies we use,
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we could face logistical difficulties that could adversely affect deliveries and we would incur costs and expend resources in connection with such change. Moreover, we may not be able to obtain terms as favorable as those received from independent third-party transportation providers, which in turn would increase our costs.
Our business depends in part on a strong brand image. If we are not able to protect our brand, we may be unable to attract a sufficient number of customers or sell sufficient quantities of our products.
We believe that the brand image we have developed has contributed significantly to the success of our business to date. We also believe that protecting The Container Store brand is integral to our business and to the implementation of our strategies for expanding our business. Our brand image may be diminished if we do not continue to make investments in areas such as marketing and advertising, as well as the day-to-day investments required for store operations, catalog mailings, online sales and employee training. Our brand image may be further diminished if new products fail to maintain or enhance our distinctive brand image. Furthermore, our reputation could be jeopardized if we fail to maintain high standards for merchandise quality, if we fail to maintain high ethical, social and environmental standards for all of our operations and activities, if we fail to comply with local laws and regulations or if we experience negative publicity or other negative events that affect our image or reputation, some of which may be beyond our ability to control, such as the effects of negative publicity regarding our vendors. Any failure to maintain a strong brand image could have an adverse effect on our sales and results of operations.
If we fail to successfully anticipate consumer preferences and demand, or to manage inventory commensurate with demand, our results of operations may be adversely affected.
Our success depends in large part on our ability to identify, originate and define storage and organization product trends, as well as to anticipate, gauge and react to changing consumer demands in a timely manner. Our products must appeal to a range of consumers whose preferences cannot always be predicted with certainty. We cannot assure you that we will be able to continue to develop products that customers respond to positively or that we will successfully meet consumer demands in the future. Any failure on our part to anticipate, identify or respond effectively to consumer preferences and demand could adversely affect sales of our products. If this occurs, our sales may decline, and we may be required to mark down certain products to sell the resulting excess inventory, which could have a material adverse effect on our financial condition and results of operations.
In addition, we must manage our merchandise in stock and inventory levels to track consumer demand. Much of our merchandise requires that we provide vendors with significant ordering lead time, frequently before market factors are known. In addition, the nature of our products requires us to carry a significant amount of inventory prior to peak selling seasons. If we are not able to anticipate consumer demand for our different product offerings, or successfully manage inventory levels for products that are in demand, we may experience:
As a result of these and other factors, we are vulnerable to demand and pricing shifts and to misjudgments in the selection and timing of merchandise purchases.
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New stores in new markets, where we are less familiar with the target customer and less well-known, may face different or additional risks and increased costs compared to stores operated in existing markets or new stores in existing markets. We also may not be able to advertise cost-effectively in new or smaller markets in which we have less store density, which could slow sales growth at such stores.
Successful expansion increases the complexity of our business and we may not be able to effectively manage our growth, which may cause our brand image and financial performance to suffer.
Our expansion in new and existing markets may present competitive, distribution, merchandising and regulatory challenges that differ from our current challenges, including competition among our stores, diminished novelty of our store design and concept, added strain on our distribution center, additional information to be processed by our management information systems and diversion of management attention from operations, such as the control of inventory levels in our stores. We also cannot guarantee that we will be able to obtain and distribute adequate product supplies to our stores or maintain adequate warehousing and distribution capability at acceptable costs. New stores also may have lower than anticipated sales volumes relative to previously opened stores during their comparable years of operation, and sales volumes at new stores may not be sufficient to achieve store-level profitability or profitability comparable to that of existing stores. To the extent that we are not able to meet these various challenges, our sales could decrease, our operating costs could increase and our operating profitability could be impacted.
Our business requires that we lease substantial amounts of space and there can be no assurance that we will be able to continue to lease space on terms as favorable as the leases negotiated in the past.
We do not own any real estate at our TCS segment. Instead, we lease all of our store locations, as well as our corporate headquarters and distribution center in Coppell, Texas. Our stores are leased from third parties and generally have an initial term of ten to fifteen years. Many of our lease agreements also have additional five-year renewal options. We believe that we have been able to negotiate favorable rental rates and tenant allowances over the last few years due in large part to the state of the economy and higher than usual vacancy rates in a number of regional malls and shopping centers. These trends may not continue, and there is no guarantee that we will be able to continue to negotiate such favorable terms. Many of our leases have early cancellation clauses, which permit the lease to be terminated by us or the landlord if certain sales levels are not met in specific periods or if the shopping venue does not meet specified occupancy standards. In addition to fixed minimum lease payments, most of our store leases provide for additional rental payments based on a percentage of sales, or "percentage rent," if sales at the respective stores exceed specified levels, as well as the payment of common area maintenance charges, real property insurance and real estate taxes. Many of our lease agreements have defined escalating rent provisions over the initial term and any extensions. Increases in our already substantial occupancy costs and difficulty in identifying economically suitable new store locations could have significant negative consequences, which include:
Additional sites that we lease may be subject to long-term non-cancelable leases if we are unable to negotiate our current standard lease terms. If an existing or future store is not profitable, and we decide
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to close it, we may nonetheless be committed to perform our obligations under the applicable lease including, among other things, paying the base rent for the balance of the lease term. Moreover, even if a lease has an early cancellation clause, we may not satisfy the contractual requirements for early cancellation under that lease. In addition, if we are not able to enter into new leases or renew existing leases on terms acceptable to us, this could have an adverse effect on our results of operations.
We will require significant capital to fund our expanding business, which may not be available to us on satisfactory terms or at all. We plan to use cash from operations to fund our operations and execute our growth strategy. If we are unable to maintain sufficient levels of cash flow, we may not meet our growth expectations or we may require additional financing which could adversely affect our financial health and impose covenants that limit our business activities.
We plan to continue our growth and expansion, including opening a number of new stores, remodeling existing stores and upgrading our information technology systems and other infrastructure, as opportunities arise. Our plans to expand our store base may not be successful and the implementation of these other plans may not result in expected increases in our net sales even though they increase our costs. We will require significant capital to support our expanding business and execute on our growth strategy.
We currently primarily depend on cash flow from operations and the Revolving Credit Facility to fund our business and growth plans. Upon the closing of this offering we expect that we will continue to primarily depend on cash flow from operations and our Revolving Credit Facility to fund our business and growth plans. If our business does not generate sufficient cash flow from operations to fund these activities, we may need additional equity or debt financing. If such financing is not available to us, or is not available on satisfactory terms, our ability to operate and expand our business or respond to competitive pressures would be curtailed and we may need to delay, limit or eliminate planned store openings or operations or other elements of our growth strategy. If we raise additional capital by issuing equity securities or securities convertible into equity securities, your ownership would be diluted.
Disruptions in the global financial markets may make it difficult for us to borrow a sufficient amount of capital to finance the carrying costs of inventory and to pay for capital expenditures and operating costs, which could negatively affect our business.
Disruptions in the global financial markets and banking systems have made credit and capital markets more difficult for companies to access, even for some companies with established revolving or other credit facilities. Under the Revolving Credit Facility, each member of the syndicate for the Revolving Credit Facility is responsible for providing a portion of the loans to be made under the facility. Factors that have previously affected our borrowing ability under the Revolving Credit Facility have included the borrowing base formula limitations, adjustments in the appraised value of our inventory used to calculate the borrowing base and the availability of each of the lenders to advance its portion of requested borrowing drawdowns under the facility. If, in connection with a disruption in the global financial markets or otherwise, any participant, or group of participants, with a significant portion of the commitments in the Revolving Credit Facility fails to satisfy its obligations to extend credit under the facility and we are unable to find a replacement for such participant or group of participants on a timely basis (if at all), our liquidity and our business may be materially adversely affected.
Our costs may change as a result of currency exchange rate fluctuations.
In fiscal 2012, approximately 79% of our merchandise was manufactured abroad based on cost of merchandise purchased. The prices charged by foreign manufacturers may be affected by the fluctuation of their local currency against the U.S. dollar. We source goods from various countries, including China, and
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thus changes in the value of the U.S. dollar compared to other currencies may affect the costs of goods that we purchase.
Our largest exposure to currency exchange rate fluctuations is between the U.S. dollar and Swedish krona. The TCS segment purchases all products from the Elfa segment in Swedish krona. Approximately 16% of our U.S. dollar merchandise purchases in the TCS segment in fiscal 2012 were originally made in Swedish krona from our Elfa segment.
If we are unable to effectively manage our online sales, our reputation and operating results may be harmed.
E-commerce has been our fastest growing business over the last several years and continues to be a growing part of our business. The success of our e-commerce business depends, in part, on factors over which we may not control. We must successfully respond to changing consumer preferences and buying trends relating to e-commerce usage. We are also vulnerable to certain additional risks and uncertainties associated with our e-commerce websites, including: changes in required technology interfaces; website downtime and other technical failures; costs and technical issues as we upgrade our website software; computer viruses; changes in applicable federal and state regulations; security breaches; and consumer privacy concerns. In addition, we must keep up to date with competitive technology trends, including the use of new or improved technology, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications, among others, which may increase our costs and which may not succeed in increasing sales or attracting customers. Our competitors, some of whom have greater resources than us, may also be able to benefit from changes in e-commerce technologies, which could harm our competitive position. Our failure to successfully respond to these risks and uncertainties might adversely affect the sales in our e-commerce business, as well as damage our reputation and brands.
Competition, including internet-based competition, could negatively impact our business, adversely affecting our ability to generate higher net sales and our ability to obtain favorable store locations.
While our differentiated product offerings have limited direct competition, similar items can be found in a variety of retailers. We compete primarily based on level of service and by product quality and selection. Competitive products can be found in mass merchants (e.g., Walmart and Target), as well as specialty retail chains (e.g., Bed Bath & Beyond and Crate & Barrel). Some of our competitors, particularly the mass merchants, are larger and have greater financial resources than we do. We also face competition from internet-based retailers (e.g., Amazon), in addition to traditional store-based retailers. This could result in increased price competition since our customers can more readily search and compare similar products.
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Our ability to obtain merchandise on a timely basis at competitive prices could suffer as a result of any deterioration or change in our vendor relationships or events that adversely affect our vendors or their ability to obtain financing for their operations.
We believe our vendor relationships are critical to our success. We do not have long-term contracts with any of our vendors and we generally transact business on an order-by-order basis, operating without any contractual assurances of continued supply, pricing or access to new products. Any of our vendors could discontinue supplying us with desired products in sufficient quantities for a variety of reasons.
The benefits we currently experience from our vendor relationships could be adversely affected if our vendors:
We historically have established excellent working relationships with many small- to mid-size vendors that generally have more limited resources, production capacities and operating histories. Market and economic events that adversely impact our vendors could impair our ability to obtain merchandise in sufficient quantities. Such events include difficulties or problems associated with our vendors' business, finances, labor, ability to export or import, as the case may be, merchandise, costs, production, insurance and reputation. There can be no assurance that we will be able to acquire desired merchandise in sufficient quantities on acceptable terms or at all in the future, especially if we need significantly greater amounts of inventory in connection with the growth of our business. We may need to develop new relationships with larger vendors, as our current vendors may be unable to supply us with needed quantities and we may not be able to find similar merchandise on the same terms from larger vendors. If we are unable to acquire suitable merchandise in sufficient quantities, at acceptable prices with adequate delivery times due to the loss of or a deterioration or change in our relationship with one or more of our key vendors or events harmful to our vendors occur, it may adversely affect our business and results of operations.
There is a risk that our vendors may sell similar or identical products to our competitors, which could harm our business.
Although many of our products are sold by our vendors only to The Container Store, products related to the majority of our non-elfa® sales are not sold to us on an exclusive basis. Of the non-elfa® products that we purchase on an exclusive basis, none of these products are sold pursuant to agreements with exclusivity provisions. As a result, most of our vendors have no obligation to refrain from selling similar or identical products to our competitors, some of whom purchase products in significantly greater volume, or entering into exclusive arrangements with other retailers that could limit our access to their products. Our vendors could also initiate or expand sales of their products through their own stores or through the
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Internet to the retail market and therefore compete with us directly or sell their products through outlet centers or discount stores, increasing the competitive pricing pressure we face.
We depend on key executive management.
We depend on the leadership and experience of our key executive management. The loss of the services of any of our executive management members could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all. We do not maintain key-man life insurance policies on any of our executive officers. We believe that our future success will depend on our continued ability to attract and retain highly skilled and qualified personnel. There is a high level of competition for experienced, successful personnel in the retail industry. Our inability to meet our staffing requirements in the future could impair our growth and harm our business.
If we are unable to find, train and retain key personnel, including new employees that reflect our brand image and embody our culture, we may not be able to grow or sustain our operations.
Our success depends in part upon our ability to attract, motivate and retain a sufficient number of store employees, including general managers and store managers, who understand and appreciate our customers, products, brand and corporate culture, and are able to adequately and effectively represent our culture and establish credibility with our customers. Our planned growth will require us to hire and train even more personnel to manage such growth. If we are unable to hire and retain personnel capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture, understanding of our customers and knowledge of the merchandise we offer, our ability to open new stores may be impaired, the performance of our existing and new stores could be materially adversely affected and our brand image may be negatively impacted. There is a high level of competition for experienced, qualified personnel in the retail industry and we compete for personnel with a variety of companies looking to hire for retail positions. Our growth plans could strain our ability to staff our new stores, particularly at the store manager level, which could have an adverse effect on our ability to maintain a cohesive and consistently strong team, which in turn could have an adverse impact on our business. If we are unable to attract, train and retain employees in the future, we may not be able to serve our customers effectively, thus reducing our ability to continue our growth and to operate our existing stores as profitably as we have in the past.
Labor activities could cause labor relations difficulties for us.
None of our U.S.-based employees is currently subject to a collective bargaining agreement. As we continue to grow and enter different regions, unions may attempt to organize all or part of our employee base at certain stores or within certain regions. Responding to such organization attempts may distract management and employees and may have a negative financial impact on individual stores, or on our business as a whole.
As of July 1, 2013, approximately 52% of Elfa's employees (6% of our total employees) were covered by collective bargaining agreements. A dispute with a union or employees represented by a union, including a failure to extend or renew our collective bargaining agreements, could result in production interruptions caused by work stoppages. If a strike or work stoppage were to occur, our results of operations could be adversely affected.
Higher health care costs and labor costs could adversely affect our business.
With the passage in 2010 of the U.S. Patient Protection and Affordable Care Act, we are required to provide affordable coverage, as defined in the Act, to all employees, or otherwise be subject to a payment
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per employee based on the affordability criteria in the Act. Many of these requirements will be phased in over a period of time, with the majority of the most impactful provisions affecting us presently anticipated to begin in the second quarter of fiscal 2015. Additionally, some states and localities have passed state and local laws mandating the provision of certain levels of health benefits by some employers. Increased health care and insurance costs could have a material adverse effect on our business, financial condition and results of operations. In addition changes in federal or state workplace regulations could adversely affect our ability to meet our financial targets.
We are subject to risks associated with our dependence on foreign imports for our merchandise.
In fiscal 2012, excluding purchases for Elfa, we purchased approximately 26% of our merchandise from vendors located in the United States and approximately 74% from vendors located outside the United States (including approximately 44% from vendors located in China). In addition, some of the merchandise we purchase from vendors in the United States also depends, in whole or in part, on vendors located outside the United States. As a result, our business depends on global trade, as well as trade and cost factors that impact the specific countries where our vendors are located, including Asia. Our future success will depend in part upon our ability to maintain our existing foreign vendor relationships and to develop new ones. While we rely on our long-term relationships with our foreign vendors, we have no long-term contracts with them and transact business on an order by order basis. Additionally, many of our imported products are subject to existing duties, tariffs and quotas that may limit the quantity of some types of goods which we may import into the United States. Our dependence on foreign imports also makes us vulnerable to risks associated with products manufactured abroad, including, among other things, risks of damage, destruction or confiscation of products while in transit to our distribution centers located in the United States, charges on or assessment of additional import duties, tariffs and quotas, loss of "most favored nation" trading status by the United States in relation to a particular foreign country, work stoppages, including without limitation as a result of events such as longshoremen strikes, transportation and other delays in shipments, including without limitation as a result of heightened security screening and inspection processes or other port-of-entry limitations or restrictions in the United States, freight cost increases, economic uncertainties, including inflation, foreign government regulations, trade restrictions, including the United States retaliating against protectionist foreign trade practices and political unrest, increased labor costs and other similar factors that might affect the operations of our vendors in specific countries such as China.
An interruption or delay in supply from our foreign sources, or the imposition of additional duties, taxes or other charges on these imports, could have a material adverse effect on our business, financial condition and results of operations unless and until alternative supply arrangements are secured.
In addition, there is a risk that compliance lapses by our vendors could occur which could lead to investigations by U.S. government agencies responsible for international trade compliance. Resulting penalties or enforcement actions could delay future imports/exports or otherwise negatively impact our business. In addition, there remains a risk that one or more of our foreign vendors will not adhere to applicable legal requirements or our global compliance standards such as fair labor standards, the prohibition on child labor and other product safety or manufacturing safety standards. The violation of applicable legal requirements, including labor, manufacturing and safety laws, by any of our vendors, the failure of any of our vendors to adhere to our global compliance standards or the divergence of the labor practices followed by any of our vendors from those generally accepted in the United States, could disrupt our supply of products from our vendors or the shipment of products to us, result in potential liability to us and harm our reputation and brand, any of which could negatively affect our business and operating results.
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Because of our international operations, we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery and anti-kickback laws.
We source a significant portion of our products from outside the United States. The U.S. Foreign Corrupt Practices Act, and other similar anti-bribery and anti-kickback laws and regulations that generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. While our vendor compliance agreements mandate compliance with applicable law, we cannot assure you that we will be successful in preventing our employees or other agents from taking actions in violation of these laws or regulations. Such violations, or allegations of such violations, could disrupt our business and result in a material adverse effect on our financial condition, results of operations and cash flows.
We face risks related to our indebtedness.
Our leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk associated with our variable rate debt and prevent us from meeting our obligations under our notes and credit facilities. As of July 1, 2013, after giving effect to the application of proceeds from this offering as set forth under "Use of Proceeds", we would have had total outstanding debt of $ million and an additional $ million of availability under the Revolving Credit Facility and the Elfa Revolving Credit Facility. Our high degree of leverage could have important consequences to us, including:
In addition, a failure by us or our subsidiaries to comply with the agreements governing our indebtedness could result in an event of default under such indebtedness, which could adversely affect our ability to respond to changes in our business and manage our operations. Upon the occurrence of an event of default under any of the agreements governing our indebtedness, the lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements. If any of our indebtedness were to be accelerated, there can be no assurance that our assets would be
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sufficient to repay this indebtedness in full, which could have a material adverse effect on our ability to continue to operate as a going concern. See "Description of Indebtedness."
We may incur additional indebtedness in the future, which may require us to use a substantial portion of our cash flow to service debt and limit our financial and operating flexibility in important ways.
We may incur additional indebtedness in the future. Any borrowings under any future debt financing (including the Revolving Credit Facility) will require interest payments and need to be repaid or refinanced, could require us to divert funds identified for other purposes to debt service and would create additional cash demands and could impair our liquidity position and add financial risk for us. Diverting funds identified for other purposes for debt service may adversely affect our business and growth prospects. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all.
Our level of indebtedness has important consequences to you and your investment in our common stock. For example, our level of indebtedness may:
We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in amounts sufficient to enable us to make payments on our indebtedness or to fund our operations.
Material damage to, or interruptions in, our information systems as a result of external factors, staffing shortages and difficulties in updating our existing software or developing or implementing new software could have a material adverse effect on our business or results of operations.
We depend largely upon our information technology systems in the conduct of all aspects of our operations. Such systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, fire and natural disasters. Damage or interruption to our information systems may require a significant investment to fix or replace them, and we may suffer interruptions in our operations in the interim. In addition, costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. Any material interruptions or failures in our information systems may have a material adverse effect on our business or results of operations.
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We also rely heavily on our information technology staff. If we cannot meet our staffing needs in this area, we may not be able to fulfill our technology initiatives while continuing to provide maintenance on existing systems.
We rely on certain software vendors to maintain and periodically upgrade many of these systems so that they can continue to support our business. The software programs supporting many of our systems were licensed to us by independent software developers. The inability of these developers or us to continue to maintain and upgrade these information systems and software programs would disrupt or reduce the efficiency of our operations if we were unable to convert to alternate systems in an efficient and timely manner.
We are vulnerable to various risks and uncertainties associated with our websites, including changes in required technology interfaces, website downtime and other technical failures, costs and technical issues as we upgrade our website software, computer viruses, changes in applicable federal and state regulation, security breaches, legal claims related to our website operations and e-commerce fulfillment and other consumer privacy concerns. Our failure to successfully respond to these risks and uncertainties could reduce website sales and have a material adverse effect on our business or results of operations.
There are claims made against us from time to time that can result in litigation that could distract management from our business activities and result in significant liability or damage to our brand.
From time to time we are involved in litigation, claims and other proceedings relating to the conduct of our business, including but not limited to consumer protection class action litigation, claims related to our business, or employment practices and claims of intellectual property infringement. In addition, from time to time, we are subject to product liability and personal injury claims for the products that we sell and the stores we operate. Our purchase orders generally require the vendor to indemnify us against any product liability claims; however, if the vendor does not have insurance or becomes insolvent, we may not be indemnified. In addition, we could face a wide variety of employee claims against us, including general discrimination, privacy, labor and employment, Employee Retirement Income Security Act of 1974, as amended, and disability claims. Any claims could also result in litigation against us and could also result in regulatory proceedings being brought against us by various federal and state agencies that regulate our business, including the U.S. Equal Employment Opportunity Commission. Often these cases raise complex factual and legal issues, which are subject to risks and uncertainties and which could require significant management time. Litigation and other claims and regulatory proceedings against us could result in unexpected expenses and liability and could also materially adversely affect our operations and our reputation.
Product recalls and/or product liability, as well as changes in product safety and other consumer protection laws, may adversely impact our operations, merchandise offerings, reputation, results of operations, cash flow and financial condition.
We are subject to regulations by a variety of federal, state and international regulatory authorities, including the Consumer Product Safety Commission. In fiscal 2012, we purchased merchandise from approximately 700 vendors. If our vendors fail to manufacture or import merchandise that adheres to product safety requirements or our quality control standards, our reputation and brands could be damaged, potentially leading to increases in customer litigation against us. It is possible that one or more of our vendors might not adhere to product safety requirements or our quality control standards, and we might not identify the deficiency before merchandise is sold. Any issues of product safety, could cause us to recall some of those products. If our vendors are unable or unwilling to recall products failing to meet product safety requirements or our quality standards, we may be required to recall those products at a
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substantial cost to us. Furthermore, to the extent we are unable to replace any recalled products, we may have to reduce our merchandise offerings, resulting in a decrease in sales, especially if a recall occurs near a seasonal period.
Moreover, changes in product safety or other consumer protection laws could lead to increased costs to us for certain merchandise, or additional labor costs associated with readying merchandise for sale. Long lead times on merchandise ordering cycles increase the difficulty for us to plan and prepare for potential changes to applicable laws. In particular, The Consumer Product Safety Improvement Act of 2008 imposes significant requirements on manufacturing, importing, testing and labeling requirements for some of our products. In the event that we are unable to timely comply with regulatory changes, significant fines or penalties could result, and could adversely affect our reputation, results of operations, cash flow and financial condition.
Failure to protect the integrity and security of individually identifiable data of our customers and employees could expose us to litigation and damage our reputation.
We receive and maintain certain personal information about our customers and employees, including credit card information. The use of this information by us is regulated at the international, federal and state levels, and is subject to certain contractual restrictions in third party contracts. Although we have implemented processes to protect the integrity and security of personal information, there can be no assurance that this information will not be obtained by unauthorized persons or used inappropriately. If the security and information systems of ours or of our business associates are compromised or our business associates fail to comply with these laws and regulations and this information is obtained by unauthorized persons or used inappropriately, it could negatively affect our reputation as our customers and employees have a high expectation that we will adequately safeguard and protect their personal information, including their credit card information, as well as our results of operations and financial conditions. Any compromise or failure could result in litigation against us or the imposition of penalties. As privacy and information security laws and regulations change, we may incur additional costs to ensure we remain in compliance.
Changes in statutory, regulatory, accounting, and other legal requirements could potentially impact our operating and financial results.
We are subject to numerous statutory, regulatory and legal requirements, domestically and abroad. Our operating results could be negatively impacted by developments in these areas due to the costs of compliance in addition to possible government penalties and litigation in the event of deemed noncompliance. Changes in the regulatory environment in the area of product safety, environmental protection, privacy and information security, wage and hour laws, among others, could potentially impact our operations and financial results.
We lease all of our properties at the TCS segment and the group headquarters and sales offices at the Elfa segment, and each is classified as an operating lease. The Financial Accounting Standards Board ("FASB") has issued an exposure draft that will revise lease accounting and require many leases currently considered to be operating leases to instead be classified as capital leases. The primary impact to this exposure draft would be that such leases would be recorded on the balance sheet as debt, and they currently have an off-balance sheet classification as operating leases. The timeline for effectiveness of this pronouncement, as well as the final guidelines and potential financial impact, are unclear at this point.
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If our operating and financial performance in any given period does not meet the guidance that we provide to the public, our stock price may decline.
We may provide public guidance on our expected operating and financial results for future periods. Although we believe that this guidance provides investors and analysts with a better understanding of management's expectations for the future and is useful to our stockholders and potential stockholders, such guidance is comprised of forward-looking statements subject to the risks and uncertainties described in this report and in our other public filings and public statements. Our actual results may not always be in line with or exceed the guidance we have provided, especially in times of economic uncertainty. If, in the future, our operating or financial results for a particular period do not meet our guidance or the expectations of investment analysts or if we reduce our guidance for future periods, the market price of our common stock may decline as well.
Our total assets include intangible assets with an indefinite life, goodwill and trademarks, and substantial amounts of property and equipment. Changes in estimates or projections used to assess the fair value of these assets, or operating results that are lower than our current estimates at certain store locations, may cause us to incur impairment charges that could adversely affect our results of operation.
Our total assets include intangible assets with an indefinite life, goodwill and trademarks, and substantial amounts of property and equipment. We make certain estimates and projections in connection with impairment analyses for these long lived assets, in accordance with FASB ASC 360, "Property, Plant and Equipment" ("ASC 360"), and ASC 350, "IntangiblesGoodwill and Other" ("ASC 350"). We also review the carrying value of these assets for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable in accordance with ASC 360 or ASC 350. We will record an impairment loss when the carrying value of the underlying asset, asset group or reporting unit exceeds its fair value. These calculations require us to make a number of estimates and projections of future results. If these estimates or projections change, we may be required to record additional impairment charges on certain of these assets. If these impairment charges are significant, our results of operations would be adversely affected. We recorded impairment charges of $0.4 million, $15.6 million and $15.5 million related to the elfa® trade name in fiscal 2010, fiscal 2011 and fiscal 2012, respectively. We also recorded goodwill impairment charges of $52.0 million, $31.5 million and $0 related to the Elfa segment in fiscal 2010, fiscal 2011 and fiscal 2012, respectively. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2 to our audited consolidated financial statements included elsewhere in this prospectus.
Significant increases in raw material prices or energy costs may adversely affect our costs, including cost of merchandise.
Any future increases in commodity prices for raw materials that are directly or indirectly related to the production of our products, such as the prices of steel, oil, resin and pulp, may adversely affect our costs. Furthermore, the transportation industry may experience a shortage or reduction of capacity, which could be exacerbated by higher fuel prices. Our results of operations may be adversely affected if we or our vendors are unable to secure, or are able to secure only at significantly higher costs, such commodities or fuel.
Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets, including net operating loss carryforwards, may result in volatility of our operating results.
We are subject to income taxes in various U.S. and certain foreign jurisdictions. We record tax expense based on our estimates of future payments, which may include reserves for uncertain tax positions in multiple tax jurisdictions, and valuation allowances related to certain net deferred tax assets, including net
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operating loss carryforwards. At any one time, many tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. We expect that throughout the year there could be ongoing variability in our quarterly tax rates as events occur and exposures are evaluated.
In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance, timing of the utilization of net operating loss carryforwards, or by changes to existing accounting rules or regulations. Further, tax legislation may be enacted in the future which could negatively impact our current or future tax structure and effective tax rates.
Our operating results are subject to quarterly and seasonal fluctuations, and results for any quarter may not necessarily be indicative of the results that may be achieved for the full fiscal year. As a result, the market price of our common stock may fluctuate substantially.
Our quarterly results have fluctuated in the past and may fluctuate significantly in the future, depending upon a variety of factors, including, among other things, our product offerings, promotional events, store openings, the weather, remodeling or relocations, shifts in the timing of holidays, timing of catalog releases or sales, timing of delivery of orders, competitive factors and general economic conditions. As a result of these quarterly and seasonal fluctuations, the market price of our common stock may fluctuate substantially.
In addition, we historically have realized, and expect to continue to realize, higher Adjusted EBITDA in the fourth quarter of our fiscal year due to the Annual elfa® Sale. In fiscal 2012, we recorded Adjusted EBITDA of $35.0 million in the fourth fiscal quarter or approximately 39.9% of our fiscal 2012 Adjusted EBITDA.
Our comparable store sales and quarterly results have fluctuated significantly in the past based on a number of economic, seasonal and competitive factors, and we expect them to continue to fluctuate in the future. Since the beginning of fiscal 2008, our quarterly comparable store sales growth has ranged from a decrease of 13.7% to an increase of 12.9%. This variability could cause our comparable store sales and quarterly results to fall below the expectations of securities analysts or investors, which could result in a decline in the market price of our common stock.
Accordingly, our results of operations may fluctuate on a seasonal basis and relative to corresponding periods in prior years. Moreover, we may take certain pricing or marketing actions that could have a disproportionate effect on our business, financial condition and results of operations in a particular quarter or selling season. These initiatives may disproportionately impact results in a particular quarter and we believe that comparisons of our operating results from period to period are not necessarily meaningful and cannot be relied upon as indicators of future performance.
Material disruptions at one of our Elfa manufacturing facilities could negatively affect our business.
Elfa operates four manufacturing facilities: two in Sweden, one in Poland and one in Finland. A material operational disruption in one of our Elfa manufacturing facilities could occur as a result of any number of events including, but not limited to, major equipment failures, labor stoppages, transportation failures affecting the supply and shipment of materials and finished goods, severe weather conditions and disruptions in utility services. Such a disruption could negatively impact production, customer deliveries and financial results.
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Our failure or inability to protect our intellectual property rights could diminish the value of our brand and weaken our competitive position.
We attempt to protect our intellectual property rights, both in the United States and in foreign countries, through a combination of copyright, patent, trademark, trade secret, trade dress and unfair competition laws, as well as confidentiality procedures, and assignment and licensing arrangements. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition. Further, we cannot assure you that competitors or other third parties will not infringe our intellectual property rights, or that we will have adequate resources to enforce our intellectual property rights.
In addition, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States, and it may be more difficult for us to successfully challenge the use of our intellectual property rights by other parties in such countries and our competitive position may suffer.
If third parties claim that we infringe upon their intellectual property rights, our operating results could be adversely affected.
We face the risk of claims that we have infringed third parties' intellectual property rights. Any claims of intellectual property infringement, even those without merit, could (i) be expensive and time consuming to defend; (ii) cause us to cease making, licensing or using products or methods that allegedly infringe; (iii) require us to redesign, reengineer, or rebrand our products or packaging, if feasible; (iv) divert management's attention and resources; or (v) require us to enter into royalty or licensing agreements in order to obtain the right to use a third party's intellectual property. Any royalty or licensing agreements, if required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain products, any of which could have a negative impact on our operating results and harm our future prospects.
Risks related to this offering and ownership of our common stock
We are controlled by investment funds managed by LGP, whose interests in our business may be different from yours.
Upon the closing of this offering and after giving effect to the Exchange, LGP will own approximately shares, or %, of our outstanding common stock. LGP will, for the foreseeable future, have significant influence over our reporting and corporate management and affairs, and will be able to control virtually all matters requiring stockholder approval. LGP is able to, subject to applicable law, designate a majority of the members of our board of directors and control actions to be taken by us and our board of directors, including amendments to our certificate of incorporation and bylaws and approval of significant corporate transactions, including mergers and sales of substantially all of our assets. The directors so elected will have the authority, subject to the terms of our indebtedness and our rules and regulations, to issue additional stock, implement stock repurchase programs, declare dividends and make other decisions. It is possible that the interests of LGP may in some circumstances conflict with our interests and the interests of our other stockholders, including you.
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We are a "controlled company" within the meaning of the New York Stock Exchange listing requirements and as a result, will qualify for and intend to rely on exemptions from certain corporate governance requirements. You will not have the same protection afforded to stockholders of companies that are subject to such corporate governance requirements.
Because of the aggregate voting power over our Company held by LGP, we are considered a "controlled company" for the purposes of the New York Stock Exchange listing requirements. As such, we are exempt from the corporate governance requirements that our board of directors, our compensation committee and our nominating and corporate governance committee meet the standard of independence established by those corporate governance requirements. The independence standards are intended to ensure that directors who meet the independence standard are free of any conflicting interest that could influence their actions as directors.
Following this offering, we intend to utilize these exemptions afforded to a "controlled company." Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the New York Stock Exchange.
Our anti-takeover provisions could prevent or delay a change in control of our Company, even if such change in control would be beneficial to our stockholders.
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws as well as provisions of Delaware law could discourage, delay or prevent a merger, acquisition or other change in control of our Company, even if such change in control would be beneficial to our stockholders. These provisions include:
In addition, the Delaware General Corporation Law, to which we are subject, prohibits us, except under specified circumstances, from engaging in any mergers, significant sales of stock or assets or business combinations with any stockholder or group of stockholders who owns at least 15% of our common stock.
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Taking advantage of the reduced disclosure requirements applicable to "emerging growth companies" may make our common stock less attractive to investors.
The JOBS Act provides that, so long as a company qualifies as an "emerging growth company," it will, among other things:
We currently intend to take advantage of the reduced disclosure requirements regarding executive compensation. We have irrevocably elected not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 107(b) of the JOBS Act. If we remain an "emerging growth company" after fiscal 2013, we may take advantage of other exemptions, including the exemptions from the advisory vote requirements and executive compensation disclosures under the Dodd-Frank Act and the exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act. We cannot predict if investors will find our common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our common stock. Also, as a result of our intention to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us as long as we qualify as an "emerging growth company," our financial statements may not be comparable to companies that fully comply with regulatory and reporting requirements upon the public company effective dates.
We will incur increased costs as a result of becoming a public company.
As a public company, we will incur significant legal, accounting, insurance and other expenses that we have not incurred as a private company, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with the Sarbanes-Oxley Act and related rules implemented by the Securities and Exchange Commission ("SEC"). The expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. In estimating these costs, we took into account expenses related to insurance, legal, accounting, and compliance activities, as well as other expenses not currently incurred. These laws and regulations could also make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as our executive officers. Furthermore, if we are unable to
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satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation.
Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.
We are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC's rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Though we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. However, as an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
To comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal control can divert our management's attention from other matters that are important to the operation of our business. In addition, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. For example, a material weakness was identified during fiscal 2012 relating to the accounting for the elfa® trade name. We are taking steps to remediate this material weakness and expect to do so by the end of fiscal 2013. If we identify additional material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
We do not currently expect to pay any cash dividends.
The continued operation and expansion of our business will require substantial funding. Accordingly, we do not currently expect to pay any cash dividends on shares of our common stock. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant. Additionally, the obligors under the Senior Secured Term Loan Facility, the Revolving Credit Facility and the Elfa Senior Secured Credit Facilities are currently restricted from paying cash dividends, and we expect these restrictions to continue in the future. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on
32
the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.
Substantial future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon the closing of this offering, we will have shares of common stock outstanding. The shares of common stock offered in this offering will be freely tradable without restriction under the Securities Act, except for any shares of our common stock that may be held or acquired by our directors, executive officers and other affiliates, as that term is defined in the Securities Act, which will be restricted securities under the Securities Act. Restricted securities may not be sold in the public market unless the sale is registered under the Securities Act or an exemption from registration is available. Current holders of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. See "Certain Relationships and Related Party TransactionsStockholders Agreement."
We and each of our executive officers and directors and certain shareholders, including LGP, which collectively will hold % of our outstanding capital stock upon the closing of this offering and after giving effect to the Exchange, have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of the shares of common stock or securities convertible into or exchangeable for, or that represent the right to receive, shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of J.P. Morgan Securities LLC, Barclays Capital Inc. and Credit Suisse Securities (USA) LLC. See "Underwriting."
All of our shares of common stock outstanding as of the date of this prospectus may be sold in the public market by existing stockholders 180 days after the date of this prospectus, subject to applicable limitations imposed under federal securities laws. See "Shares Eligible for Future Sale" for a more detailed description of the restrictions on selling shares of our common stock after this offering.
In the future, we may also issue our securities if we need to raise capital in connection with a capital raise or acquisitions. The amount of shares of our common stock issued in connection with a capital raise or acquisition could constitute a material portion of our then-outstanding shares of our common stock.
Our common stock may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares at or above the initial public offering price.
After this offering, the market price for our common stock is likely to be volatile, in part because our shares have not been traded publicly. In addition, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:
33
Numerous factors affect our business and cause variations in our operating results and affect our net sales and comparable store sales, including consumer preferences, buying trends and overall economic trends; our ability to identify and respond effectively to trends and customer preferences; actions by competitors and other shopping center tenants; changes in our merchandise mix; pricing; the timing of our releases of new merchandise and promotional events; the level of customer service that we provide in our stores; changes in sales mix among sales channels; our ability to source and distribute products effectively; inventory shrinkage; weather conditions, particularly during the holiday season; and the number of stores we open in any period.
The initial public offering price of our common stock will be determined by negotiations between us and the underwriters based upon a number of factors and may not be indicative of prices that will prevail following the closing of this offering. Volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the initial public offering price. As a result, you may suffer a loss on your investment.
In addition, stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many retail companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.
If you purchase shares of common stock sold in this offering, you will incur immediate and substantial dilution.
If you purchase shares of common stock in this offering, you will incur immediate and substantial dilution in the amount of $ per share based upon an assumed initial public offering price of $ per share (the midpoint of the estimated price range set forth on the cover of this prospectus), which is substantially higher than the pro forma net tangible book value per share of our outstanding common stock. In addition, you may also experience additional dilution, or potential dilution, upon future equity issuances to investors or to our employees, consultants and directors under our stock option and equity incentive plans. See "Dilution."
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Cautionary note regarding forward-looking statements
This prospectus contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions. The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. We believe that these factors include, but are not limited to, the following:
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These forward-looking statements speak only as of the date of this prospectus and are subject to a number of risks, uncertainties and assumptions described in the "Risk Factors" section and elsewhere in this prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein after we distribute this prospectus, whether as a result of any new information, future events or otherwise.
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Holders of our preferred stock are entitled to a preferential payment upon certain distributions by us to holders of our capital stock (referred to as the liquidation preference), equal to the purchase price for such share ($1,000.00) plus accrued and unpaid dividends from August 16, 2007, the date of the LGP acquisition, on the outstanding liquidation preference at a rate of 12% per annum, compounded quarterly. Upon the closing of this offering, a dividend in the aggregate amount of $ million, which we refer to as the "Dividend," will be paid from the net proceeds from this offering as follows: (i) first, on a pro rata basis to the holders of our senior preferred stock, which shall reduce the liquidation preference of each such share of our senior preferred stock until such liquidation preference has been reduced to $1,000.00 per share and (ii) second, on a pro rata basis to the holders of our junior preferred stock, which will reduce the liquidation preference of each such share of our junior preferred stock.
As required by our existing stockholders agreement, each holder of our preferred stock will enter into an agreement, which we refer to as the "Exchange Agreement." Pursuant to the Exchange Agreement, immediately following the payment of the Dividend with the net proceeds from this offering, we will exchange each outstanding share of preferred stock for a number of shares of common stock determined by dividing (a) the liquidation preference amount of such preferred stock as of such date (after giving effect to the payment of the Dividend) by (b) the initial public offering price in this offering, net of the underwriting discount and a pro rata portion, based upon the number of shares being sold in this offering, of the estimated offering-related expenses incurred by us. References to the "Exchange" throughout this prospectus refer to the exchange of our preferred stock for our common stock.
As of July 1, 2013, as adjusted to give effect to the reduction resulting from the Dividend the liquidation preference per share of our senior preferred stock would have been $1,000.00 and the liquidation preference per share of our junior preferred stock would have been $ . These liquidation preference amounts are calculated as follows:
|
Liquidation preference per share of our senior preferred stock |
Liquidation preference per share of our junior preferred stock |
|||||
---|---|---|---|---|---|---|---|
Liquidation preference as of July 1, 2013 |
$ | 1,566.75 | $ | 2,023.39 | |||
Payment of the Dividend |
$ | (566.75 | ) | $ | |||
Liquidation preference as of July 1, 2013, after giving effect to the payment of the Dividend |
$ | 1,000.00 | $ | ||||
The number of shares of common stock actually issued in the Exchange will be calculated using the liquidation preference as of the closing date of this offering. The liquidation preference will accrue at a rate of $242,311.28 per day in the aggregate, which represents $105,745.53 per day with respect to the shares of senior preferred stock and $136,565.75 per day with respect to the shares of our junior preferred stock, for each day on or after July 1, 2013 and to, but excluding, the closing date of this offering. Such accrual of the liquidation preference compounds on a quarterly basis, and as a result, the rate of accrual will increase on the first day of the next calendar quarter.
Assuming an initial public offering price of $ per share (the midpoint of the range set forth on the front cover of this prospectus), estimated offering-related expenses (including the underwriting discount) incurred by us as specified under "Underwriting" of $ , and the liquidation preference as of July 1, 2013 after giving effect to the payment of the Dividend, shares of common stock will be
37
outstanding immediately after the Exchange. The actual number of shares of common stock that will be issued as a result of the Exchange is subject to change based on the initial public offering price, the offering-related expenses (including the underwriter discount) estimated to be incurred by us and the closing date of this offering.
The following table sets forth the computation of the exchange ratio as of July 1, 2013 for each share of our senior preferred stock and our junior preferred stock, based on the above assumptions:
|
Senior preferred stock |
Junior preferred stock |
|||||
---|---|---|---|---|---|---|---|
Liquidation preference per share as of July 1, 2013, after giving effect to the payment of the Dividend |
$ | 1,000.00 | $ | ||||
Assumed initial offering price per share |
|||||||
Estimated offering expenses per share(a) |
|||||||
Initial public offering price per share, net of expenses |
|||||||
Exchange ratio |
|||||||
(a) Calculated based on total estimated offering expenses, including underwriting discounts and other offering-related expenses incurred by us, of $ and shares issued in the offering of .
Because the number of shares of common stock issued in the Exchange will be determined by reference to the initial public offering price in this offering, a change in the assumed initial public offering price would have a corresponding impact on the number of outstanding shares of common stock presented in this prospectus after giving effect to this offering. The following number of shares of our common stock would be outstanding immediately after the Exchange and giving effect to this offering, assuming (i) the initial public offering prices for our common stock shown below, (ii) the liquidation preference per share as of July 1, 2013 after giving effect to the payment of the Dividend, as described above and (iii) the offering related-expenses and the liquidation preference specified above (without giving effect to any change in underwriting discount per share which would otherwise result from a change in the assumed initial public offering price per share because the underwriting discount is calculated as a percentage of the initial public offering price):
|
$ |
$ |
$ |
$ |
$ |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exchange ratio for our senior preferred stock |
||||||||||||||||
Exchange ratio for our junior preferred stock |
||||||||||||||||
Shares of our common stock issued in the Exchange |
||||||||||||||||
Outstanding shares of our common stock as of July 1, 2013 |
498,170 | 498,170 | 498,170 | 498,170 | 498,170 | |||||||||||
Shares of our common stock issued in this offering |
||||||||||||||||
Outstanding shares of our common stock, after giving effect to the Exchange and this offering |
||||||||||||||||
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We estimate that the net proceeds to us from this offering, after deducting the underwriting discount and estimated offering expenses, will be approximately $ million (or $ million if the underwriters exercise their option to purchase additional shares in full), assuming the shares are offered at $ per share (the midpoint of the estimated price range set forth on the cover of this prospectus).
Each $1.00 increase or decrease in the assumed initial public offering price of $ per share (the midpoint of the estimated price range set forth on the cover of this prospectus) would increase or decrease, as applicable, the net proceeds we receive from this offering by approximately $ million (or $ million if the underwriters exercise their option to purchase additional shares in full), assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discount and estimated offering expenses. We may also increase or decrease the number of shares we are offering. An increase of 1,000,000 shares in the number of shares offered by us, together with a concomitant $1.00 increase in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover of this prospectus, would increase the net proceeds to us from this offering by approximately $ after deducting underwriting discounts and estimated offering expenses payable by us. Conversely, a decrease of 1,000,000 shares in the number of shares offered by us together with a concomitant $1.00 decrease in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover of this prospectus, would decrease the net proceeds to us from this offering by approximately $ million after deducting underwriting discounts and estimated offering expenses payable by us.
We intend to use the net proceeds that we receive from this offering as follows:
As of June 1, 2013, $362.3 million was outstanding under the Senior Secured Term Loan Facility. Borrowings under the Senior Secured Term Loan Facility had a weighted average interest rate of 6.42% for fiscal 2012. The Senior Secured Term Loan Facility accrues interest at the rate of the London Interbank Offered Rate (LIBOR) + 4.25%, subject to a LIBOR floor of 1.25%, and matures on April 6, 2019. See "Description of Indebtedness."
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The following table sets forth our cash and cash equivalents and capitalization as of June 1, 2013, as follows:
For more information, please see "Use of Proceeds" and "The Exchange" elsewhere in this prospectus. You should read this information in conjunction with our consolidated financial statements and the related notes appearing at the end of this prospectus and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and other financial information contained in this prospectus.
40
|
As of June 1, 2013 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(in thousands, except share and per share data) |
Actual |
As adjusted(1) |
As further adjusted(2) |
|||||||
Cash and cash equivalents |
$ | 13,703 | $ | $ | ||||||
Debt: |
||||||||||
Revolving Credit Facility(3) |
$ | 5,000 | ||||||||
Senior Secured Term Loan Facility |
362,250 | |||||||||
Elfa Term Loan Facility |
4,719 | |||||||||
Elfa Revolving Credit Facility(4) |
18,178 | |||||||||
Mortgage and other loans |
5,902 | |||||||||
Total Debt |
$ | 396,049 | ||||||||
Stockholders' equity: |
||||||||||
Senior preferred stock, par value $0.01 per share; 250,000 shares authorized, 202,480 shares issued and 202,196 outstanding, actual; and no shares authorized, issued or outstanding, as adjusted and as further adjusted(5) |
$ | 2 | ||||||||
Junior preferred stock, par value $0.01 per share; 250,000 shares authorized, 202,480 shares issued and 202,196 outstanding, actual; and no shares authorized, issued or outstanding, as adjusted and as further adjusted(5) |
2 | |||||||||
Common stock, par value $0.01 per share; 600,000 shares authorized, 500,356 shares issued and 498,169 outstanding, actual; shares authorized, as adjusted and as further adjusted; shares issued, as adjusted and as further adjusted; and shares outstanding, as adjusted and as further adjusted |
5 | |||||||||
Additional paid-in capital(5) |
455,370 | |||||||||
Accumulated other comprehensive loss |
(158 | ) | ||||||||
Retained deficit |
(319,160 | ) | ||||||||
Treasury stock, 2,755 shares |
(787 | ) | ||||||||
Total stockholders' equity |
$ | 135,274 | ||||||||
Total capitalization |
$ | 531,323 | $ | $ | ||||||
(1) We have calculated the number of shares of common stock to be issued pursuant to the Exchange using the liquidation preference of the shares of our preferred stock as of July 1, 2013, after giving effect to the payment of the Dividend. Accordingly, such amounts do not take into account shares of our common stock to be issued in the Exchange in satisfaction of the liquidation preference of our preferred stock accrued on or after July 1, 2013 and to, but excluding, the closing date of this offering. Such liquidation preference will accrue at a rate of $242,311.28 per day in the aggregate (which would be exchanged in the Exchange for approximately shares of our common stock per day). Such accrual of the liquidation preference compounds on a quarterly basis, and as a result, the rate of accrual will increase on the first day of the next calendar quarter.
Because the number of shares of common stock for which a share of our preferred stock will be exchanged will be determined by reference to the initial public offering price in this offering, a change in the assumed initial public offering price would also have a corresponding impact on the number of shares of common stock exchanged for shares of our preferred stock pursuant to the Exchange upon the closing of this offering.
If the initial public offering price is equal to $ per share, the midpoint of the price range set forth on the cover of this prospectus, our preferred stock would be exchanged for an aggregate of shares of our common stock upon the closing of this offering, assuming that the closing occurs on July 1, 2013. A $1.00 increase in the assumed initial public offering price of $ per share would decrease by shares the number of shares of our common stock that will be exchanged for our preferred stock upon the closing of this offering. A $1.00 decrease in the assumed initial public offering price of $ per share would increase by shares the number of shares of our common stock that will be exchanged for our preferred stock upon the closing of this offering.
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(2) A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) the as further adjusted amount of each of additional paid-in capital, total stockholders' equity and total capitalization by approximately $ , $ and $ , respectively, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We may also increase or decrease the number of shares we are offering. An increase of 1,000,000 shares in the number of shares offered by us, together with a concomitant $1.00 increase in the assumed initial public offering price of $ per share (which is the midpoint of the price range set forth on the cover of this prospectus) would increase (decrease) the as further adjusted amount of each of additional paid in capital, total stockholders' equity and total capitalization by approximately $ , $ and $ , respectively, after deducting underwriting discounts and estimated offering expenses payable by us. Conversely, a decrease of 1,000,000 shares in the number of shares offered by us together with a concomitant $1.00 decrease in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover of this prospectus, would decrease (increase) the as adjusted amount of each of additional paid in capital, total stockholders' equity and total capitalization by approximately $ , $ and $ , respectively after deducting underwriting discounts and estimated offering expenses payable by us.
The table above does not include:
(3) The Revolving Credit Facility provides for borrowings of up to $75.0 million.
(4) The Elfa Revolving Credit Facility provides for borrowings of up to SEK 175,000,000 (approximately $26.4 million as of June 1, 2013).
(5) The accrued liquidation preference of the senior preferred stock and junior preferred stock as of June 1, 2013 was approximately $314.3 million and approximately $405.9 million, respectively.
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We currently intend to retain all available funds and any future earnings for use in the operation of our business, and therefore we do not currently expect to pay any cash dividends. Any future determination to pay dividends will be at the discretion of our board of directors and will depend upon our results of operations, financial condition, capital requirements and other factors that our board of directors deems relevant. We are a holding company, and substantially all of our operations are carried out by our subsidiary, The Container Store, Inc., and its subsidiaries. The Container Store, Inc.'s ability to pay dividends to us is limited by the Revolving Credit Facility and the Senior Secured Term Loan Facility, which may in turn limit our ability to pay dividends on our common stock. Our ability to pay dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred equity securities of ours or of our subsidiaries.
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If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering. Our pro forma net tangible book value as of June 1, 2013 was $ million, or $ per share of our common stock. Pro forma net tangible book value per share represents our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares of our common stock outstanding after giving effect to the exchange of all outstanding shares of our preferred stock upon the closing of this offering (but without giving effect to the increase per share attributable to this offering).
After giving effect to the sale of shares of common stock that we are offering at an assumed initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 1, 2013 would have been approximately $ million, or approximately $ per share. This amount represents an immediate increase in net tangible book value of $ per share to our existing stockholders and an immediate dilution in net tangible book value of approximately $ per share to new investors purchasing shares of common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock. The following table illustrates this dilution:
Assumed initial public offering price per share |
$ | $ | |||||
Pro forma net tangible book value per share as of June 1, 2013 |
|||||||
Increase per share attributable to this offering |
|||||||
Pro forma as adjusted net tangible book value per share after this offering |
$ | $ | |||||
Dilution per share to new investors |
$ | $ | |||||
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $ , and dilution in net tangible book value per share to new investors by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Because the number of shares of common stock into which a share of our preferred stock is convertible will be determined by reference to the initial public offering price in this offering, a change in the assumed initial public offering price would also have a corresponding impact on our pro forma net tangible book value per share of common stock. Our pro forma net tangible book value per share of common stock would have been the following at June 1, 2013 assuming the initial public offering prices for our common stock shown below:
$ |
$ | $ | $ | $ | |||||||||
$ |
$ | $ | $ | $ | |||||||||
If the underwriters exercise their option to purchase additional shares of our common stock in full in this offering, the pro forma as adjusted net tangible book value after the offering would be $ per share, the increase in net tangible book value per share to existing stockholders would be $ and
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the dilution in net tangible book value per share to new investors would be $ per share, in each case assuming an initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus.
The following table summarizes, as of June 1, 2013, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing stockholders and new investors paid. The calculation below is based on an assumed initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
|
Shares purchased | Total consideration | |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Average price per share |
|||||||||||||||
|
Number |
Percent |
Amount |
Percent |
||||||||||||
Existing stockholders |
% | $ | % | $ | ||||||||||||
New investors |
||||||||||||||||
Total |
100% | $ | 100% | $ | ||||||||||||
The foregoing tables and calculations are based on the number of shares of our common stock and our preferred stock outstanding as of July 1, 2013 after giving effect to the exchange of all outstanding shares of our preferred stock upon the closing of this offering determined by reference to the midpoint of the range set forth on the cover of this prospectus and the payment of the Dividend to holders of our preferred stock, and exclude:
In this prospectus, we have calculated the number of shares of common stock to be issued pursuant to the Exchange using an assumed offering date of July 1, 2013 for purposes of calculating the liquidation preference of the shares of our preferred stock, and the application of the net proceeds to us. Accordingly, such amounts do not take into account shares of common stock to be issued in the Exchange in satisfaction of the accrued liquidation preference on our preferred stock on and after July 1, 2013 and to, but excluding, the closing date of this offering. Such dividends accrue at a rate of $242,311.28 per day in the aggregate (which would be exchanged in the Exchange for approximately shares of our common stock per day). Such accrual of the liquidation preference compounds on a quarterly basis, and as a result, the rate of accrual will increase on the first day of the next calendar quarter. For more information, please see "Use of Proceeds" and "The Exchange" elsewhere in this prospectus.
To the extent any of our outstanding options are exercised, there will be further dilution to new investors. To the extent all of such outstanding options had been exercised as of July 1, 2013, the pro forma as adjusted net tangible book value per share after this offering would be $ , and the dilution in net tangible book value per share to new investors would be $ .
45
If the underwriters exercise their option to purchase additional shares in full:
46
Selected consolidated financial data
You should read the following selected consolidated financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.
We have derived the consolidated statement of operations data and consolidated balance sheet data for the fiscal years ended February 26, 2011, February 25, 2012, and March 2, 2013 from our audited consolidated financial statements for such years and for the thirteen weeks ended May 26, 2012 and June 1, 2013 from our unaudited consolidated financial statements for such periods. Our audited consolidated financial statements as of February 25, 2012 and March 2, 2013 and for the fiscal years ended February 26, 2011, February 25, 2012 and March 2, 2013 have been included in this prospectus. The consolidated statements of operations data for the fiscal year ended February 27, 2010 is derived from our audited consolidated financial statements that are not included in this prospectus. We have derived the consolidated statement of operations data for the fiscal year ended February 28, 2009 and the consolidated balance sheet data as of February 28, 2009 and February 27, 2010 from our unaudited consolidated financial statements that are not included in this prospectus. Our unaudited consolidated financial statements as of June 1, 2013 and for the thirteen weeks ended May 26, 2012 and June 1, 2013 have been included in this prospectus and, in the opinion of management, include all adjustments (inclusive only of normally recurring adjustments) necessary for a fair presentation. Historical results are not indicative of the results to be expected in the future and results of operations for an interim period are not necessarily indicative of results for a full year. The fiscal year ended March 2, 2013 included 53 weeks, whereas the fiscal years ended February 25, 2012, and February 26, 2011, February 27, 2010 and February 28, 2009 included 52 weeks. Categories that are only applicable to our TCS segment are noted with (*) and to our Elfa segment with (+). For segment data, see Note 14 to our consolidated financial statements.
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|
Fiscal year ended | Thirteen weeks ended | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
February 28, 2009 |
February 27, 2010 |
February 26, 2011 |
February 25, 2012 |
March 2, 2013 |
May 26, 2012 |
June 1, 2013 |
|||||||||||||||
Consolidated statement of operations |
||||||||||||||||||||||
Net sales |
$ | 551,276 | $ | 523,004 | $ | 568,820 | $ | 633,619 | $ | 706,757 | $ | 145,755 | $ | 159,645 | ||||||||
Cost of sales (excluding depreciation and amortization) |
238,559 | 223,759 | 235,295 | 266,355 | 291,146 | 61,578 | 66,441 | |||||||||||||||
Gross profit |
312,717 | 299,245 | 333,525 | 367,264 | 415,611 | 84,177 | 93,204 | |||||||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization) |
270,803 | 252,272 | 269,474 | 293,665 | 331,380 | 76,500 | 83,807 | |||||||||||||||
Pre-opening costs* |
4,076 | 1,167 | 1,747 | 5,203 | 7,562 | 1,661 | 1,962 | |||||||||||||||
Goodwill and trade name impairment+ |
124,228 | | 52,388 | 47,037 | 15,533 | | | |||||||||||||||
Depreciation and amortization |
22,650 | 23,845 | 24,354 | 27,451 | 29,550 | 7,254 | 7,470 | |||||||||||||||
Restructuring charges+ |
| | 341 | 133 | 6,369 | 494 | 241 | |||||||||||||||
Long-lived asset impairment |
2,091 | | | | | | | |||||||||||||||
Other expenses |
1,532 | 329 | | 193 | 987 | 247 | 219 | |||||||||||||||
Loss on disposal of assets |
53 | 121 | 139 | 210 | 88 | 111 | 22 | |||||||||||||||
Income (loss) from operations |
(112,716 | ) | 21,511 | (14,918 | ) | (6,628 | ) | 24,142 | (2,090 | ) | (517 | ) | ||||||||||
Interest expense |
28,716 | 27,331 | 26,006 | 25,417 | 21,388 | 5,798 | 5,555 | |||||||||||||||
Loss on extinguishment of debt* |
| | | | 7,333 | 7,236 | 1,101 | |||||||||||||||
Loss before taxes |
(141,432 | ) | (5,820 | ) | (40,924 | ) | (32,045 | ) | (4,579 | ) | (15,124 | ) | (7,173 | ) | ||||||||
Provision (benefit) for income taxes(1) |
1,195 | (1,623 | ) | 4,129 | (1,374 | ) | (4,449 | ) | (3,160 | ) | (1,844 | ) | ||||||||||
Net loss |
$ | (142,627 | ) | $ | (4,197 | ) | $ | (45,053 | ) | $ | (30,671 | ) | $ | (130 | ) | $ | (11,964 | ) | $ | (5,329 | ) | |
Less preferred dividends accrued |
(54,897 | ) | (61,868 | ) | (69,723 | ) | (78,575 | ) | (90,349 | ) | (21,156 | ) | (22,298 | ) | ||||||||
Net loss attributable to common stockholders (basic and diluted)(2) |
$ | (197,524 | ) | $ | (66,065 | ) | $ | (114,776 | ) | $ | (109,246 | ) | $ | (90,479 | ) | $ | (33,120 | ) | $ | (27,627 | ) | |
Net Loss per share attributable to common stockholders (basic and diluted)(2) |
$ | (395.21 | ) | $ | (132.30 | ) | $ | (230.05 | ) | $ | (219.10 | ) | $ | (181.60 | ) | $ | (66.44 | ) | $ | (55.46 | ) | |
Shares used in computing net loss per share attributable to common stockholders (basic and diluted)(2) |
499,791 | 499,338 | 498,905 | 498,600 | 498,225 | 498,472 | 498,169 | |||||||||||||||
Pro forma net loss per common share (basic and diluted)(2) |
||||||||||||||||||||||
Shares used in computing pro forma net loss per common share (basic and diluted)(2) |
||||||||||||||||||||||
|
Fiscal year | Fiscal quarter | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
February 28, 2009 |
February 27, 2010 |
February 26, 2011 |
February 25, 2012 |
March 2, 2013 |
May 26, 2012 |
June 1, 2013 |
|||||||||||||||
Other financial data: |
||||||||||||||||||||||
Adjusted EBITDA (in thousands)(3) |
$ | 46,995 | $ | 51,862 | $ | 67,707 | $ | 75,644 | $ | 87,585 | $ | 8,257 | $ | 10,233 | ||||||||
Adjusted EBITDA margin(4) |
8.5% | 9.9% | 11.9% | 11.9% | 12.4% | 5.7% | 6.4% | |||||||||||||||
Comparable store sales growth for the period*(5) |
(9.3)% | (5.7)% | 8.1% | 7.6% | 4.4% | 6.0% | 2.7% | |||||||||||||||
Number of stores open at end of period* |
46 | 47 | 49 | 53 | 58 | 55 | 60 | |||||||||||||||
Average ticket*(6) |
$ | 54.62 | $ | 52.48 | $ | 53.68 | $ | 55.60 | $ | 57.34 | $ | 53.03 | $ | 56.04 | ||||||||
48
|
As of | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
February 28, 2009 |
February 27, 2010 |
February 26, 2011 |
February 25, 2012 |
March 2, 2013 |
June 1, 2013 |
|||||||||||||
Consolidated balance sheet data: |
|||||||||||||||||||
Cash and cash equivalents |
$ | 7,248 | $ | 26,162 | $ | 49,756 | $ | 51,163 | $ | 25,351 | $ | 13,703 | |||||||
Working capital(7) |
37,642 | 33,365 | 21,341 | 21,367 | 22,557 | 30,970 | |||||||||||||
Total assets |
761,309 | 797,133 | 773,303 | 746,678 | 752,820 | 743,037 | |||||||||||||
Long-term debt(8) |
303,875 | 305,673 | 300,893 | 300,166 | 285,371 | 377,871 | |||||||||||||
Total stockholders' equity |
285,305 | 303,301 | 268,227 | 232,989 | 233,375 | 135,274 | |||||||||||||
(1) The difference between our effective tax rate and the statutory Federal tax rate is predominantly related to fluctuations in the valuation allowance recorded against net deferred assets not expected to be realized, the effects of foreign income taxed at a different rate and intraperiod tax allocations between continuing operations and other comprehensive income.
(2) Common stockholders do not share in net income unless earnings exceed the unpaid dividends on our preferred stock. Accordingly, prior to this offering, there were no earnings available for common stockholders because in fiscal 2008, fiscal 2009, fiscal 2010, fiscal 2011, fiscal 2012 and the thirteen weeks ended May 26, 2012 and June 1, 2013 we reported a net loss. During any period in which we had a net loss, the loss was attributed only to the common stockholders. For all periods presented, basic and diluted net loss per common share are the same, as any additional common stock equivalents would be anti-dilutive.
Pro forma figures give effect to the offering and the Exchange as if such transactions were completed at the beginning of such period. We will not have any preferred stock outstanding after the completion of this offering. See "The Exchange" for additional information.
As each of the exchange ratio for our senior preferred stock and the exchange ratio for our junior preferred stock will be determined based on the final initial offering price, the pro forma weighted average number of common shares, and therefore the pro forma basic and diluted earnings per common share, would change if the offering price is not $ per share (the midpoint of the range set forth in the cover of this prospectus). The following table sets forth the impact of a change in the final initial offering price on each of (i) the exchange ratio for our senior preferred stock, (ii) the exchange ratio for our junior preferred stock, (iii) our pro forma weighted average number of common shares and (iv) our pro forma earnings per common share:
|
$ |
$ |
$ |
$ |
$ |
|||||
---|---|---|---|---|---|---|---|---|---|---|
Exchange ratio for our senior preferred stock(a) |
||||||||||
Exchange ratio for our junior preferred stock(a) |
||||||||||
Shares used in computing pro forma net loss per common share (basic and diluted) |
||||||||||
Pro forma net loss per common share (basic and diluted) |
$ | $ | $ | $ | $ | |||||
(a) each of the exchange ratio for our senior preferred stock and the exchange ratio for our junior preferred stock is affected by changes in offering expenses at each initial offering price, specifically the estimated underwriting discount, which is based on a percentage of the total offering proceeds. No other offering expenses are affected by changes in the initial offering price.
In addition, we have calculated the number of shares of common stock to be issued pursuant to the Exchange using an assumed offering date of July 1, 2013 for purposes of calculating the liquidation preference of the shares of our preferred stock. Accordingly, such amounts do not take into account shares of common stock to be issued in the Exchange in satisfaction of the accrued liquidation preference on our preferred stock after July 1, 2013 and through the closing date of this offering. Such liquidation preference will accrue at a rate of approximately $242,311.28 per day in the aggregate (which would be exchanged in the Exchange for approximately shares of our common stock per day).
(3) EBITDA and Adjusted EBITDA have been presented in this prospectus as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as net income before interest, taxes, depreciation, and amortization. Adjusted EBITDA is calculated in accordance with the Secured Term Loan Facility and the Revolving Credit Facility and is the basis for performance evaluation under our executive compensation programs. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash and other items, that we do not consider in our evaluation of ongoing operating performance from period to period as discussed further below.
EBITDA and Adjusted EBITDA are included in this prospectus because they are key metrics used by management, our board of directors and LGP to assess our financial performance. EBITDA and Adjusted EBITDA are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. In addition to covenant compliance and executive performance evaluations, we use Adjusted EBITDA to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.
EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity and should not be considered as alternatives to net income (loss) as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures, store openings and certain other cash costs that may recur in the future. EBITDA and Adjusted EBITDA contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the
49
same as or similar to some of the adjustments in this presentation, such as pre-opening costs, stock compensation expense, and losses on extinguishment of debt. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using EBITDA and Adjusted EBITDA supplementally. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
A reconciliation of net loss to EBITDA and Adjusted EBITDA is set forth below:
|
Fiscal year ended | Thirteen weeks ended | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
February 28, 2009 |
February 27, 2010 |
February 26, 2011 |
February 25, 2012 |
March 2, 2013 |
May 26, 2012 |
June 1, 2013 |
|||||||||||||||
Net loss |
$ | (142,627 | ) | $ | (4,197 | ) | $ | (45,053 | ) | $ | (30,671 | ) | $ | (130 | ) | $ | (11,964 | ) | $ | (5,329 | ) | |
Depreciation and amortization |
22,650 | 23,845 | 24,354 | 27,451 | 29,550 | 7,254 | 7,470 | |||||||||||||||
Interest expense |
28,716 | 27,331 | 26,006 | 25,417 | 21,388 | 5,798 | 5,555 | |||||||||||||||
Income tax expense (benefit) |
1,195 | (1,623 | ) | 4,129 | (1,374 | ) | (4,449 | ) | (3,160 | ) | (1,844 | ) | ||||||||||
EBITDA |
(90,066 | ) | 45,356 | 9,436 | 20,823 | 46,359 | (2,072 | ) | 5,852 | |||||||||||||
Management fees(a) |
| | | 500 | 1,000 | 250 | 250 | |||||||||||||||
Pre-opening costs*(b) |
4,076 | 1,167 | 1,747 | 5,000 | 7,562 | 1,661 | 1,962 | |||||||||||||||
Goodwill and trade name impairment+(c) |
124,228 | | 52,388 | 47,037 | 15,533 | | | |||||||||||||||
Non-cash rent(d) |
5,450 | 4,033 | 2,442 | 1,935 | 2,014 | 442 | 391 | |||||||||||||||
Restructuring charges+(e) |
1,814 | | 341 | 133 | 6,369 | 494 | 241 | |||||||||||||||
Long-lived asset impairment+(f) |
2,091 | | | | | | | |||||||||||||||
Stock compensation expense(g) |
350 | | | | 283 | | 99 | |||||||||||||||
Loss on extinguishment of debt*(h) |
| | | | 7,333 | 7,236 | 1,101 | |||||||||||||||
Foreign exchange (gains) losses(i) |
(871 | ) | 959 | 1,269 | (66 | ) | 55 | (15 | ) | 94 | ||||||||||||
Other adjustments(j) |
(77 | ) | 347 | 84 | 282 | 1,077 | 261 | 243 | ||||||||||||||
Adjusted EBITDA |
$ | 46,995 | $ | 51,862 | $ | 67,707 | $ | 75,644 | $ | 87,585 | $ | 8,257 | $ | 10,233 | ||||||||
(a) Fees paid to LGP in accordance with our management services agreement, which will terminate on the closing of this offering.
(b) Non-capital expenditures associated with opening new stores and relocating stores. Prior to fiscal 2012, the amount of pre-opening costs permitted pursuant to the terms of the Revolving Credit Facility and the Senior Secured Term Loan Facility to be included in the calculation of Adjusted EBITDA was limited to $5.0 million, and the limit was increased to $10.0 million in April 2012. Similar limits exist in our compensation plan. We adjust for these costs to facilitate comparisons of our performance from period to period.
(c) Non-cash charges related to impairment of intangible assets, primarily related to Elfa, which we do not consider in our evaluation of our ongoing performance.
(d) Reflects the extent to which our annual GAAP rent expense has been above or below our cash rent payment due to lease accounting adjustments. The adjustment varies depending on the average age of our lease portfolio (weighted for size), as our GAAP rent expense on younger leases typically exceeds our cash cost, while our GAAP rent expense on older leases is typically less than our cash cost. Although our GAAP rent expense has exceeded our cash rent payments through our last fiscal year, as our lease portfolio matures we expect our cash rent payments to exceed our GAAP rent expense, beginning in fiscal 2013.
(e) Includes charges incurred to restructure business operations at Elfa, including the closure of a sales subsidiary in the Netherlands in 2008, the sale of a subsidiary in Germany and a manufacturing facility in Norway in fiscal 2012, as well as the relocation of certain head office functions in sales and marketing from the Västervik, Sweden, manufacturing location to the group headquarters in Malmö, Sweden in fiscal 2012, which we do not consider in our evaluation of our ongoing performance.
(f) Non-cash charges related to impairment of long-lived tangible assets in our Elfa segment.
(g) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on timing of awards. We adjust for these charges to facilitate comparisons from period to period.
(h) Loss recorded as a result of the repayment of the then outstanding term loan facility and senior subordinated notes in April 2012, which we do not consider in our evaluation of our ongoing operations, and the April 2013 amendment to the Senior Secured Term Loan Facility. We expect to incur a charge in connection with our repayment of a portion of the borrowings under the Senior Secured Term Loan Facility with the net proceeds of this offering.
(i) Realized foreign exchange transactional gains/losses.
(j) Other adjustments include amounts our management does not consider in our evaluation of our ongoing operations, including costs incurred in preparations for this offering and other charges.
(4) Adjusted EBITDA margin means, for any period, the Adjusted EBITDA for that period divided by the net sales for that period.
(5) A store is included in the comparable store sales calculation on the first day of the sixteenth full fiscal month following the store's opening. When a store is relocated, we continue to consider sales from that store to be comparable store sales. Net sales from our website and call center are also included in calculations of comparable store sales.
(6) Average ticket for any period is calculated by dividing (a) net sales of merchandise by our TCS segment (or, if average ticket is being calculated with respect to the elfa® Custom Design Center, the net sales of merchandise from the elfa® Custom Design Center) for that period
50
(regardless of whether such net sales are included in comparable store sales for such period) by (b) the number of transactions for that period comprising such net sales.
(7) Working capital is defined as current assets (excluding cash and cash equivalents) less current liabilities (excluding the current portion of long-term debt and revolving lines of credit).
(8) Long-term debt consists of the current and long-term portions of the Senior Secured Term Loan Facility, the Elfa Term Loan Facility, and other mortgages and loans.
51
Management's discussion and analysis of
financial condition and results of operations
You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" sections of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Our fiscal year is the 52- or 53-week period ending on the Saturday closest to February 28. The following discussion contains references to fiscal 2010, fiscal 2011, and fiscal 2012, which represent our fiscal years ended February 26, 2011, February 25, 2012, and March 2, 2013, respectively. Fiscal 2010 and fiscal 2011 were 52-week periods, whereas fiscal 2012 was a 53-week period. The first quarters of fiscal 2012 and fiscal 2013 were 13-week periods.
Overview
As of July 1, 2013, we operated 61 stores with an average size of approximately 19,000 selling square feet in 22 states and the District of Columbia. In fiscal 2012, TCS net sales were derived from approximately 10,500 unique SKUs organized into 16 distinct lifestyle departments sourced from approximately 700 vendors around the world. The breadth, depth and quality of our product offerings are designed to appeal to a broad demographic, including our core customers, who are predominantly female, affluent, highly educated and busy.
Our operations consist of two reporting segments:
52
various retailers in more than 30 countries around the world, with a concentration in the Nordic region of Europe. Through continued investment in product development, technology, and sales and marketing, we believe Elfa can continue to grow its wholesale business across Europe. In fiscal 2012, the Elfa segment had $94 million of third party net sales, which represented approximately 13% of our total net sales.
How we assess the performance of our business
We consider a variety of financial and operating measures in assessing the performance of our business. The key measures we use to determine how our business is performing are net sales, gross profit, gross margin, and selling, general and administrative expenses. In addition, we also review other important metrics such as comparable store sales, average ticket and Adjusted EBITDA.
Net sales
Net sales reflect our sales of merchandise plus other services provided, such as shipping, delivery, and installation, less returns and discounts. Net sales also include wholesale sales by Elfa. Revenue from our TCS segment is recognized upon receipt of the product by our customers or upon completion of the service to our customers. Elfa segment revenue is recorded upon shipment.
The retail and wholesale businesses in which we operate are cyclical, and consequently our sales are affected by general economic conditions. Purchases of our products are sensitive to trends in the levels of consumer spending, which are affected by a number of factors such as consumer disposable income, housing market conditions, stock market performance, consumer debt, interest rates, tax rates and overall consumer confidence.
Our business is moderately seasonal. As a result, our revenues fluctuate from quarter to quarter, which often affects the comparability of our interim results. Net sales are historically higher in the fourth quarter due primarily to the impact of our Annual elfa® Sale, which begins on December 24th and runs into early February each year.
Gross profit and gross margin
Gross profit is equal to our net sales less cost of sales. Gross profit as a percentage of net sales is referred to as gross margin. Cost of sales in our TCS segment includes the purchase cost of inventory less vendor rebates, in-bound freight, as well as inventory shrinkage. Costs incurred to ship or deliver merchandise to customers, as well as direct installation costs, are also included in cost of sales in our TCS segment. Elfa segment cost of sales from manufacturing operations includes direct costs associated with production, primarily material and wages. The components of our cost of sales may not be comparable to the components of cost of sales or similar measures by other retailers. As a result, data in this prospectus regarding our gross profit and gross margin may not be comparable to similar data made available by other retailers.
Our gross profit is variable in nature and generally follows changes in net sales. Our gross margin can be impacted by changes in the mix of products sold. For example, sales from our TCS segment typically provide a higher gross margin than sales to third parties from our Elfa segment. Gross margin for our TCS segment is also susceptible to foreign currency risk as purchases of elfa® products from our Elfa segment are in Swedish krona, while sales of these products are in U.S. dollars. We mitigate this risk through the use of forward contracts, whereby we hedge purchases of inventory by locking in foreign currency exchange rates in advance.
53
Selling, general and administrative expenses
Selling, general and administrative expenses includes all operating costs not included in cost of sales or pre-opening costs. For our TCS segment, these include all payroll and payroll-related expenses, marketing expenses, all occupancy expenses (which include rent, real estate taxes, common area maintenance, utilities, telephone, property insurance, and repair and maintenance), costs to ship product from the distribution center to our stores, and supplies expenses. We also incur costs for our distribution and corporate office operations. For our Elfa segment, these include sales and marketing expenses, product development costs, and all expenses related to operations at headquarters. Depreciation and amortization is excluded from both gross profit and selling, general and administrative expenses. Selling, general and administrative expenses also include non-cash stock-based compensation.
Selling, general and administrative expenses includes both fixed and variable components and, therefore, is not directly correlated with net sales. The components of our selling, general and administrative expenses may not be comparable to the components of similar measures of other retailers. We expect that our selling, general and administrative expenses will increase in future periods with future growth and in part due to additional legal, accounting, insurance, and other expenses that we expect to incur as a result of being a public company, including compliance with the Sarbanes-Oxley Act.
Comparable store sales
A store is included in the comparable store sales calculation on the first day of the sixteenth full fiscal month following the store's opening, which is when we believe comparability is achieved. When a store is relocated, we continue to include sales from that store in comparable store sales. Sales from our website and call center, which are included in our net sales for all periods discussed below, are also included in calculations of comparable store sales.
Comparable store sales allow us to evaluate how our retail store base is performing by measuring the change in period-over-period net sales in stores that have been open for fifteen months or more. Various factors affect comparable store sales, including:
Opening new stores is an important part of our growth strategy. As we continue to pursue our growth strategy, we anticipate that a significant percentage of our net sales will come from stores not included in our comparable store sales calculation. Accordingly, comparable store sales are only one measure we use to assess the success of our growth strategy.
Average ticket
Average ticket for any period is calculated by dividing (a) net sales of merchandise from our TCS segment (or, if average ticket is being calculated with respect to the elfa® Custom Design Center, the net sales of merchandise from the elfa® Custom Design Center) for that period (regardless of whether such net sales are included in comparable sales for such period) by (b) the number of transactions for that period comprising such net sales. Historically, the average ticket for our elfa® department has been significantly higher than our overall average ticket.
54
Adjusted EBITDA
EBITDA and Adjusted EBITDA are key metrics used by management, our board of directors and LGP to assess our financial performance. EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. In addition to covenant compliance and executive performance evaluations, we use Adjusted EBITDA to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures.
We define EBITDA as net income before interest, taxes, depreciation, and amortization. Adjusted EBITDA is calculated in accordance with the Secured Term Loan Facility and the Revolving Credit Facility and is the basis for performance evaluation under our executive compensation programs. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash and other items, that we do not consider representative of our ongoing operating performance. For reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, see "Summary Historical Consolidated Financial and Other Data."
Results of operation
The following tables summarize key components of our results of operations for the periods indicated, in dollars and as a percentage of net sales (categories that are only applicable to our TCS segment are noted with (*) and to our Elfa segment with (+)). For segment data, see Note 14 to our consolidated financial statements.
|
Fiscal year | Thirteen weeks ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
2010 |
2011 |
2012 |
May 26, 2012 |
June 1, 2013 |
|||||||||||
Net sales |
$ | 568,820 | $ | 633,619 | $ | 706,757 | $ | 145,755 | $ | 159,645 | ||||||
Cost of sales (excluding depreciation and amortization) |
235,295 | 266,355 | 291,146 | 61,578 | 66,441 | |||||||||||
Gross profit |
333,525 | 367,264 | 415,611 | 84,177 | 93,204 | |||||||||||
Selling, general and administrative expenses (excluding depreciation and amortization) |
269,474 | 293,665 | 331,380 | 76,500 | 83,807 | |||||||||||
Pre-opening costs* |
1,747 | 5,203 | 7,562 | 1,661 | 1,962 | |||||||||||
Goodwill and trade name impairment+ |
52,388 | 47,037 | 15,533 | | | |||||||||||
Depreciation and amortization |
24,354 | 27,451 | 29,550 | 7,254 | 7,470 | |||||||||||
Restructuring charges+ |
341 | 133 | 6,369 | 494 | 241 | |||||||||||
Other expenses |
| 193 | 987 | 247 | 219 | |||||||||||
Loss on disposal of assets |
139 | 210 | 88 | 111 | 22 | |||||||||||
Income (loss) from operations |
(14,918 | ) | (6,628 | ) | 24,142 | (2,090 | ) | (517 | ) | |||||||
Interest expense |
26,006 | 25,417 | 21,388 | 5,798 | 5,555 | |||||||||||
Loss on extinguishment of debt* |
| | 7,333 | 7,236 | 1,101 | |||||||||||
Loss before taxes |
(40,924 | ) | (32,045 | ) | (4,579 | ) | (15,124 | ) | (7,173 | ) | ||||||
Provision (benefit) for income taxes |
4,129 | (1,374 | ) | (4,449 | ) | (3,160 | ) | (1,844 | ) | |||||||
Net loss |
$ | (45,053 | ) | $ | (30,671 | ) | $ | (130 | ) | $ | (11,964 | ) | $ | (5,329 | ) | |
55
|
Fiscal year | Thirteen weeks ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
|
2010 |
2011 |
2012 |
May 26, 2012 |
June 1, 2013 |
||||||
Percentage of net sales: |
|||||||||||
Net sales |
100.0% | 100.0% | 100.0% | 100.0% | 100.0% | ||||||
Cost of sales (excluding depreciation and amortization) |
41.4% | 42.0% | 41.2% | 42.2% | 41.6% | ||||||
Gross profit |
58.6% | 58.0% | 58.8% | 57.8% | 58.4% | ||||||
Selling, general and administrative expenses (excluding depreciation and amortization) |
47.4% | 46.3% | 46.9% | 52.5% | 52.5% | ||||||
Pre-opening costs* |
0.3% | 0.8% | 1.1% | 1.1% | 1.2% | ||||||
Goodwill and trade name impairment+ |
9.2% | 7.5% | 2.2% | | | ||||||
Depreciation and amortization |
4.3% | 4.3% | 4.2% | 5.0% | 4.7% | ||||||
Restructuring charges+ |
0.0% | 0.0% | 0.9% | 0.3% | 0.2% | ||||||
Other expenses |
0.0% | 0.0% | 0.1% | 0.2% | 0.1% | ||||||
Loss on disposal of assets |
0.0% | 0.0% | 0.0% | 0.1% | 0.0% | ||||||
Income (loss) from operations |
(2.6% | ) | (1.0% | ) | 3.4% | (1.4% | ) | (0.3% | ) | ||
Interest expense |
4.6% | 4.0% | 3.0% | 4.0% | 3.5% | ||||||
Loss on extinguishment of debt* |
| | 1.0% | 5.0% | 0.7% | ||||||
Loss before taxes |
(7.2% | ) | (5.0% | ) | (0.6% | ) | (10.4% | ) | (4.5% | ) | |
Provision (benefit) for income taxes |
0.7% | (0.2% | ) | (0.6% | ) | (2.2% | ) | (1.2% | ) | ||
Net loss |
(7.9% | ) | (4.8% | ) | (0.0% | ) | (8.2% | ) | (3.3% | ) | |
Operating data: |
|||||||||||
Comparable store sales growth for the period* |
8.1% | 7.6% | 4.4% | 6.0% | 2.7% | ||||||
Number of stores open at end of period* |
49 | 53 | 58 | 55 | 60 | ||||||
Average ticket* |
$53.68 | $55.60 | $57.34 | $53.03 | $56.04 | ||||||
First thirteen weeks of fiscal 2013 compared to first thirteen weeks of fiscal 2012
Net sales
The following table summarizes our net sales for the first thirteen weeks of fiscal 2013 and fiscal 2012:
(dollars in thousands) |
Thirteen Weeks Ended May 26, 2012 |
% total |
Thirteen Weeks Ended June 1, 2013 |
% total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
TCS net sales |
$ | 122,003 | 83.7% | $ | 137,479 | 86.1% | |||||||
Elfa third party net sales |
23,752 | 16.3% | 22,166 | 13.9% | |||||||||
Net Sales |
$ | 145,755 | 100.0% | $ | 159,645 | 100.0% | |||||||
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Net sales in the first quarter of 2013 increased by $13,890, or 9.5%, compared to the first quarter of fiscal 2012. This increase is comprised of the following components:
(in thousands) |
Net sales |
|||
---|---|---|---|---|
Net sales for the first thirteen weeks of fiscal 2012 |
$ | 145,755 | ||
Incremental net sales increase (decrease) due to: |
||||
Comparable stores (including a $596 increase in online sales) |
4,800 | |||
New stores |
10,341 | |||
Elfa third party net sales |
(1,586 | ) | ||
Other |
335 | |||
Net sales for the first thirteen weeks of 2013 |
$ | 159,645 | ||
This increase in net sales was driven by comparable store sales growth of 2.7%, which benefited from online sales growth of 10.5%. The comparable store sales growth was primarily attributable to an increase in the average ticket of 4.9%, which more than offset a 2.1% decrease in transactions. New store net sales increases are due to seven incremental stores, five of which were opened in fiscal 2012 (including two in the first quarter of fiscal 2012) and two of which were opened in the first quarter of fiscal 2013. These increases were partially offset by the $1,586 decline in Elfa segment third party sales, which were impacted negatively by continuing weakness in the European economy and the Nordic market, as well as the sale of an unprofitable German subsidiary in the fourth quarter of fiscal 2012. The decline in Elfa segment sales was partially offset by the appreciation of the Swedish krona against the U.S. dollar.
Gross profit and gross margin
Gross profit in the first thirteen weeks of fiscal 2013 increased by $9,027, or 10.7%, compared to the same time period in fiscal 2012. The increase in gross profit was primarily the result of increased sales, as well as improved margins on a consolidated basis. The following table summarizes the gross margin for the first quarters of fiscal 2013 and fiscal 2012 by segment and total. The segment margins include the impact of inter-segment sales from the Elfa segment to the TCS segment:
|
Thirteen Weeks Ended | ||||||
---|---|---|---|---|---|---|---|
|
May 26, 2012 |
June 1, 2013 |
|||||
TCS gross margin |
58.9% | 58.9% | |||||
Elfa gross margin |
39.9% | 40.3% | |||||
Total gross margin |
57.8% | 58.4% | |||||
TCS gross margin remained consistent at 58.9%. Elfa gross margin improved due to lower direct material costs and a favorable shift in product and market mix compared to the same time period last year. On a consolidated basis, gross margin improved due to a larger percentage of third party sales coming from the more profitable TCS segment compared to the same time period last year.
57
Selling, general and administrative expenses
Selling, general and administrative expenses in the first thirteen weeks of fiscal 2013 increased by $7,307 or 9.6%, compared to the same period in fiscal 2012. The increase in selling, general and administrative expenses was primarily due to the increase in sales. The following table summarizes the selling, general and administrative expenses as a percentage of consolidated net sales for the first quarter of fiscal 2013 and the first quarter of fiscal 2012:
|
Thirteen Weeks Ended | ||||||
---|---|---|---|---|---|---|---|
|
May 26, 2012 % of net sales |
June 1, 2013 % of net sales |
|||||
TCS selling, general and administrative |
44.7% | 45.5% | |||||
Elfa selling, general and administrative |
7.8% | 7.0% | |||||
Total selling, general and administrative |
52.5% | 52.5% | |||||
TCS selling, general and administrative expenses increased by 80 basis points as a percentage of total net sales. Compensation, benefits, and recruiting expenses and professional fees were the most significant factors as we invest in our employee base and incur additional costs in preparation for this offering and operating as a public company. Repairs and maintenance and supplies costs also increased as a percentage of sales. Elfa selling, general and administrative expenses decreased by 80 basis points as a percentage of total net sales due to cost management initiatives and the sale of a German subsidiary in the prior year.
Pre-opening costs
Pre-opening costs increased $301 or 18.1% in the first thirteen weeks of fiscal 2013 to $1,962, as compared to $1,661 in the first thirteen weeks of fiscal 2012. We incurred significant pre-opening costs for three stores in the first quarter of fiscal 2013, two of which opened during that time and one of which opened in the second quarter of fiscal 2013. These costs exceeded those incurred in advance of opening three stores in the first quarter of fiscal 2012, one of which was a relocation.
Interest expense
Interest expense decreased $243, or 4.2%, to $5,555 in the first thirteen weeks of fiscal 2013 as compared to $5,798 in the first thirteen weeks of fiscal 2012. This decrease resulted primarily from the refinancing transaction effected in April 2012 pursuant to which we repaid our $125 million prior senior secured term loan facility, entered into on August 16, 2007, which we refer to as the "Prior Senior Secured Term Loan Facility," as well as our higher interest bearing senior subordinated notes with borrowings under our new $275 million Senior Secured Term Loan Facility at a lower overall interest rate, which we collectively refer to as the "Refinancing Transactions."
The decrease in interest expense due to the Refinancing Transactions was offset in part by the April 2013 amendment and increase in borrowings under the Senior Secured Term Loan Facility of $90.0 million, which we refer to as the "Increase and Repricing Transactions." The additional $90.0 million was used to finance a one-time dividend payment made to holders of our senior preferred stock in April 2013. The resulting increase in the principal amount of the Senior Secured Term Loan Facility resulted in higher interest expense, which was offset in part by the lower interest rate under the Senior Secured Term Loan Facility resulting from the Increase and Repricing Transactions. The Senior Secured Term Loan Facility now accrues interest at a rate of LIBOR + 4.25%, subject to a LIBOR floor of 1.25%. Prior to the Repricing Transactions, the Senior Secured Term Loan Facility accrued interest at a rate of LIBOR plus 5.0%, subject to a LIBOR floor of 1.25%.
58
Loss on extinguishment of debt
We recorded expenses of $1,101 in the first quarter of fiscal 2013 associated with the Increase and Repricing Transactions, including the acceleration of deferred financing costs, legal fees, and other associated costs. In the first quarter of fiscal 2012, we recorded expenses of $7,236 associated with the Refinancing Transactions, which is described above under "Interest Expense."
Taxes
The benefit for income taxes decreased $1,316 in the first quarter of fiscal 2013 to $1,844 as compared to $3,160 in the first quarter of fiscal 2012. The decrease was largely attributable to a decrease in loss before taxes, as well as an increase in the expected annual effective tax rate.
Fiscal 2012 compared to fiscal 2011
Net sales
The following table summarizes our net sales for fiscal 2012 and fiscal 2011:
(dollars in thousands) |
Fiscal 2011 |
% total |
Fiscal 2012 |
% total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
TCS net sales |
$ | 530,909 | 83.8% | $ | 613,252 | 86.8% | |||||||
Elfa third party net sales |
102,710 | 16.2% | 93,505 | 13.2% | |||||||||
Net Sales |
$ | 633,619 | 100.0% | $ | 706,757 | 100.0% | |||||||
Net sales in fiscal 2012 increased by $73,138, or 11.5%, compared to fiscal 2011. This increase is comprised of the following components:
(in thousands) |
Net sales |
|||
---|---|---|---|---|
Net sales for fiscal 2011 |
$ | 633,619 | ||
Incremental net sales increase (decrease) due to: |
||||
Comparable stores (including a $5,616 increase in online sales) |
19,915 | |||
New stores |
40,785 | |||
53rd week sales |
11,088 | |||
Installation services |
9,739 | |||
Elfa third party net sales |
(9,205 | ) | ||
Other |
816 | |||
Net sales fiscal 2012 |
$ | 706,757 | ||
The increase in net sales was driven by comparable store sales growth of 4.4%, which benefited from online sales growth of 24.6%. The comparable store sales growth was primarily attributable to an increase in the average ticket of 4.2%. New store net sales increases are due to nine incremental stores, five of which were opened in fiscal 2012. The additional (53rd) week of fiscal 2012 generated incremental sales of $11,008; fiscal 2011 consisted of 52 weeks. The increase in installation services was due to the acquisition of The Container Store Services, LLC in the fourth quarter of fiscal 2011. The Container Store Services, LLC is a subsidiary that performs installation of elfa products. These increases were partially offset by the $9,205 decline in Elfa third party net sales, which were impacted negatively by continuing weakness in the European economy and the Nordic market, the sale of a German subsidiary, and the depreciation of the Swedish krona against the U.S. dollar.
59
Gross profit and gross margin
Gross profit in fiscal 2012 increased by $48,347, or 13.2%, compared to fiscal 2011. The increase in gross profit was primarily the result of increased sales, as well as improved margins at Elfa. The following table summarizes the gross margin for fiscal 2012 and fiscal 2011 by segment and total. The segment margins include the impact of inter-segment sales from the Elfa segment to the TCS segment:
|
Fiscal 2011 |
Fiscal 2012 |
|||||
---|---|---|---|---|---|---|---|
TCS gross margin |
59.0% | 59.0% | |||||
Elfa gross margin |
37.5% | 38.7% | |||||
Total gross margin |
58.0% | 58.8% | |||||
TCS gross margin remained consistent at 59.0%. Elfa gross margin improved primarily due to lower direct material costs compared to the same time period last year. On a consolidated basis, gross margin improved due to a larger percentage of net sales coming from the more profitable TCS segment compared to the same time period last year.
Selling, general and administrative expenses
Selling, general and administrative expenses in fiscal 2012 increased by $37,715 or 12.8%, compared to the fiscal 2011. The increase in selling, general and administrative expenses was primarily due to the increase in sales. The following table summarizes the selling, general and administrative expenses as a percentage of consolidated net sales for fiscal 2012 and fiscal 2011:
|
Fiscal 2011 % of net sales |
Fiscal 2012 % of net sales |
|||||
---|---|---|---|---|---|---|---|
TCS selling, general and administrative |
39.5% | 41.0% | |||||
Elfa selling, general and administrative |
6.8% | 5.9% | |||||
Total selling, general and administrative |
46.3% | 46.9% | |||||
TCS selling, general and administrative expenses increased by 150 basis points as a percentage of total net sales. Compensation, benefits, and recruiting expenses was the most significant factor as we invested in training in our stores and additional personnel to support our growth, primarily in certain corporate office functions and our distribution center. Health insurance claims also increased in fiscal 2012 as compared to fiscal 2011. Other expenses contributing to the increase were transportation and information technology maintenance costs. Reductions as a percentage of sales included occupancy expenses, which are largely fixed in nature and decline as a percentage of sales when comparable store sales increase. Elfa selling, general and administrative expenses decreased by 90 basis points as a percentage of total net sales due to strong cost management during the year, including the sale of a German subsidiary.
Pre-opening costs
Pre-opening costs increased $2,359 or 45.3% in fiscal 2012 to $7,562, as compared to $5,203 in fiscal 2011. We incurred significant pre-opening costs for eight stores in fiscal 2012, six of which opened in fiscal 2012 (five new stores and one relocation) and two which opened in the first quarter of fiscal 2013. This is compared to pre-opening costs incurred for five stores in fiscal 2011.
Goodwill and trade name impairment
Goodwill and trade name impairment expense was $15,533 in fiscal 2012 as compared to $47,037 in fiscal 2011. When we were acquired in 2007, a substantial portion of the purchase price was recorded as
60
goodwill and other intangible assets at Elfa. All impairment charges incurred in fiscal 2012 and fiscal 2011 are related to the Elfa segment. Elfa has experienced a challenging economic climate in Europe, which resulted in Elfa not achieving its third party sales and profit forecasts in fiscal 2012 and fiscal 2011. The impairment charge in fiscal 2012 was related to the Elfa trade name and was calculated using a relief from royalty discounted cash flow analysis. Of the $47,037 impairment charge recorded in fiscal 2011, $31,453 was related to goodwill associated with the Elfa segment, calculated using an income approach, and represented a complete impairment of goodwill for the Elfa segment. The remaining $15,584 of the impairment charge in fiscal 2011 was related to the Elfa trade name.
As discussed above, reported impairment charges relate solely to the write-off of goodwill and the write-down of the trade name at Elfa due to the ongoing European recession which affected the segment's wholesale business and other factors discussed herein. The goodwill for the Elfa segment was fully impaired in fiscal 2011 and there is no balance remaining on our balance sheet. These impairment charges exceeded our consolidated net loss in every period presented herein.
Restructuring charges
During fiscal 2012, Elfa implemented a plan to restructure its business operations to improve efficiency. In conjunction with these efforts, a subsidiary in Germany was sold and a manufacturing facility in Norway was shut down and consolidated into a like facility in Sweden. Additionally, certain head office functions in sales and marketing were relocated from the Västervik, Sweden, manufacturing location to the group headquarters in Malmö, Sweden. In conjunction with these moves, $6,369 of charges were incurred and recorded as restructuring charges during fiscal 2012, the majority of which was severance.
Interest expense
Interest expense decreased $4,029, or 15.9%, to $21,388 in fiscal 2012 as compared to $25,417 in fiscal 2011. This decrease resulted primarily from the Refinancing Transactions, whereby a new $275 million Senior Secured Term Loan Facility was entered into, replacing the Prior Senior Secured Term Loan Facility and senior subordinated notes. The Senior Secured Term Loan Facility accrued interest at LIBOR plus 5.0%, subject to a LIBOR floor of 1.25%. The Prior Senior Secured Term Loan Facility accrued interest at LIBOR plus 3.0%. The senior subordinated notes accrued interest at 11.0% (11.5% to the extent paid in kind).
Loss on extinguishment of debt
We recorded expenses of $7,333 in fiscal 2012 associated with the Refinancing Transactions described above. This amount consisted of an early extinguishment fee, acceleration of deferred financing costs, legal fees and other associated costs.
Taxes
The benefit for income taxes increased by $3,075 in fiscal 2012 to $4,449 as compared to $1,374 in fiscal 2011. The increase was largely attributable to a reduction in impairments of intangibles not deductible for tax purposes and changes in the valuation allowance on deferred tax assets not expected to be realized in the future. Also contributing to the increase in the income tax benefit was a statutory reduction in Swedish tax rates and other effects of foreign income taxes.
61
Fiscal 2011 compared to fiscal 2010
Net sales
The following table summarizes our net sales for fiscal 2011 and fiscal 2010:
(dollars in thousands) |
Fiscal 2010 |
% total |
Fiscal 2011 |
% total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
TCS net sales |
$ | 472,333 | 83.0% | $ | 530,909 | 83.8% | |||||||
Elfa third party net sales |
96,487 | 17.0% | 102,710 | 16.2% | |||||||||
Net Sales |
$ | 568,820 | 100.0% | $ | 633,619 | 100.0% | |||||||
Net sales in fiscal 2011 increased by $64,799, or 11.4%, compared to fiscal 2010. This increase is comprised of the following components:
(in thousands) |
Net sales |
|||
---|---|---|---|---|
Net sales for fiscal 2010 |
$ | 568,820 | ||
Incremental net sales increase due to: |
||||
Comparable stores (including a $5,233 increase in online sales) |
36,344 | |||
New stores |
18,297 | |||
Installation services |
2,725 | |||
Elfa third party net sales |
6,223 | |||
Other |
1,210 | |||
Net sales fiscal 2011: |
$ | 633,619 | ||
This increase in net sales was driven by comparable store sales growth of 7.6%, which benefited from online sales growth of 29.7%. The comparable store sales growth was attributable to an increase in the average ticket of 3.9% combined with a 3.6% increase in transactions. New store net sales increases were due to six incremental stores, four of which were opened in fiscal 2011. The increase in installation services was due to the acquisition of The Container Store Services, LLC in the fourth quarter of fiscal 2011. Elfa third party net sales were impacted positively by the appreciation of the Swedish krona against the U.S. dollar, which more than offset the impact of recessionary trends in Europe which caused a decline in orders from retailers in the region.
Gross profit and gross margin
Gross profit in fiscal 2011 increased by $33,739, or 10.1%, compared to fiscal 2010. The increase in gross profit was primarily the result of increased sales, partially offset by lower margins. The following table summarizes the gross margin for fiscal 2011 and fiscal 2010 by segment and total. The segment margins include the impact of inter-segment sales from the Elfa segment to the TCS segment:
|
Fiscal 2010 |
Fiscal 2011 |
|||||
---|---|---|---|---|---|---|---|
TCS gross margin |
59.9% | 59.0% | |||||
Elfa gross margin |
38.7% | 37.5% | |||||
Total gross margin |
58.6% | 58.0% | |||||
TCS gross margin declined 90 basis points in fiscal 2011 as compared to fiscal 2010. The decline in gross margin was primarily due to higher inter-segment cost of sales in our elfa department, as the U.S. dollar weakened as compared to the Swedish krona. Elfa gross margin declined primarily due to more promotional activity utilized to generate sales during a recessionary environment.
62
Selling, general and administrative expenses
Selling, general and administrative expenses in fiscal 2011 increased by $24,191 or 9.0%, compared to the fiscal 2010. The increase in selling, general and administrative expenses was primarily due to the increase in sales. The following table summarizes the selling, general and administrative expenses as a percentage of consolidated net sales for fiscal 2011 and fiscal 2010:
|
Fiscal 2010 % of net sales |
Fiscal 2011 % of net sales |
|||||
---|---|---|---|---|---|---|---|
TCS selling, general and administrative |
40.6% | 39.5% | |||||
Elfa selling, general and administrative |
6.8% | 6.8% | |||||
Total selling, general and administrative |
47.4% | 46.3% | |||||
TCS selling, general and administrative expenses decreased by 110 basis points as a percentage of total net sales. The improvement was primarily attributable to occupancy costs, which are largely fixed in nature, and declined as a percentage of net sales. Marketing costs also declined as a percentage of net sales, as a larger percentage of our marketing efforts shifted to new stores in fiscal 2011. Elfa selling, general and administrative expenses remained flat at 6.8% as a percentage of total net sales.
Pre-opening costs
Pre-opening costs increased $3,456, or 197.8%, in fiscal 2011 to $5,203, as compared to $1,747 in fiscal 2010. We incurred significant pre-opening costs for five stores in fiscal 2011, four of which opened in fiscal 2011 and one which opened in the first quarter of fiscal 2012. This is compared to two new stores and one relocated store in fiscal 2010.
Goodwill and trade name impairment
Goodwill and trade name impairment expense was $47,037 in fiscal 2011 as compared to $52,388 in fiscal 2010. All impairment charges incurred in fiscal 2011 and fiscal 2010 are related to the Elfa segment. Elfa has experienced a challenging economic climate in Europe, which resulted in Elfa not achieving its sales and profit forecast in fiscal 2011 and fiscal 2010. Of the $47,037 impairment charge recorded in fiscal 2011, $31,453 was related to goodwill associated with the Elfa segment, calculated using an income approach, and represented a complete impairment of goodwill for the Elfa segment. The remaining $15,584 of the impairment charge in fiscal 2011 was related to the Elfa trade name, calculated using a relief from royalty method. Of the $52,388 impairment charge recorded in fiscal 2010, $51,971 was related to goodwill associated with the Elfa segment and the remaining $417 was related to the Elfa trade name.
Interest expense
Interest expense decreased $589, or 2.3%, to $25,417 in fiscal 2011 as compared to $26,006 in fiscal 2010. The decrease in interest expense is primarily attributable to the expiration of interest rate swaps in the second quarter of fiscal 2011 and the elimination of the associated interest expense and was partially offset by interest income recorded from receipt of an IRS refund received by TCS in the first quarter of fiscal 2010.
Taxes
We recorded an income tax benefit in fiscal 2011 of $1,374, which is a $5,503 reduction in income tax expense as compared to the income tax provision recorded in fiscal 2010 of $4,129. The reduction in income tax expense is largely attributable to a decrease in impairments of intangibles not deductible for
63
tax purposes, changes in the valuation allowance on deferred tax assets not expected to be realized in the future and the effects of foreign income taxes.
Interim results and seasonality
The following table sets forth our historical quarterly results of operation as well as certain operating data for each of our most recent nine fiscal quarters. This unaudited quarterly information has been prepared on the same basis as our annual audited financial statements appearing elsewhere in this document, and includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary to present fairly the financial information for the fiscal quarters presented.
The quarterly data should be read in conjunction with our audited consolidated financial statements and the related notes appearing elsewhere in this document. It has not been audited or reviewed by our Independent Registered Public Accounting Firm and accordingly they express no opinion or any form of assurance on it.
Quarterly results of operations
|
Fiscal 2011 | Fiscal 2012 | |
|||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands, except average ticket and operating data) |
Fiscal 2013 | |||||||||||||||||||||||||||
|
Second quarter |
|
Fourth quarter |
|
Second quarter |
|
Fourth quarter(1) |
|||||||||||||||||||||
First quarter |
Third quarter |
First quarter |
Third quarter |
First quarter |
||||||||||||||||||||||||
Net sales |
$ | 132,966 | $ | 149,701 | $ | 157,830 | $ | 193,122 | $ | 145,755 | $ | 168,560 | $ | 175,416 | $ | 217,025 | $ | 159,645 | ||||||||||
Gross Profit |
76,612 | 85,879 | 93,405 | 111,368 | 84,177 | 98,977 | 104,114 | 128,342 | 93,204 | |||||||||||||||||||
Income (loss) from operations |
1,465 | 8,195 | 10,046 | (26,333 | ) | (2,090 | ) | 8,227 | 10,285 | 7,719 | (517 | ) | ||||||||||||||||
Net income (loss) |
(5,358 | ) | 1,774 | 3,265 | (30,352 | ) | (11,964 | ) | 1,871 | 3,600 | 6,362 | (5,329 | ) | |||||||||||||||
Year-Over-Year Increase |
||||||||||||||||||||||||||||
Net Sales |
10.2% | 11.1% | 9.0% | 14.6% | 9.6% | 12.6% | 11.1% | 12.4% | 9.5% | |||||||||||||||||||
Gross Profit |
10.4% | 9.2% | 5.7% | 14.7% | 9.9% | 15.3% | 11.5% | 15.2% | 10.7% | |||||||||||||||||||
Operating data |
||||||||||||||||||||||||||||
Comparable store sales change* |
7.5% | 8.8% | 6.3% | 7.9% | 6.0% | 5.4% | 4.3% | 2.7% | 2.7% | |||||||||||||||||||
Number of stores open at end of period* |
49 | 50 | 53 | 53 | 55 | 57 | 58 | 58 | 60 | |||||||||||||||||||
Average ticket* |
$ | 51.51 | $ | 54.70 | $ | 56.31 | $ | 58.58 | $ | 53.03 | $ | 56.10 | $ | 58.62 | $ | 60.32 | $ | 56.04 | ||||||||||
Adjusted EBITDA(2) |
$ | 8,485 | $ | 16,427 | $ | 20,380 | $ | 30,352 | $ | 8,257 | $ | 21,882 | $ | 22,456 | $ | 34,990 | $ | 10,233 | ||||||||||
Percent of Annual Results |
||||||||||||||||||||||||||||
Net sales |
21.0% | 23.6% | 24.9% | 30.5% | 20.6% | 23.8% | 24.8% | 30.7% | n/a | |||||||||||||||||||
Gross Profit |
20.9% | 23.4% | 25.4% | 30.3% | 20.3% | 23.8% | 25.1% | 30.9% | n/a | |||||||||||||||||||
Adjusted EBITDA |
11.2% | 21.7% | 26.9% | 40.1% | 9.4% | 25.0% | 25.6% | 39.9% | n/a | |||||||||||||||||||
Adjusted EBITDA Margin |
6.4% | 11.0% | 12.9% | 15.7% | 5.7% | 13.0% | 12.8% | 16.1% | 6.4% | |||||||||||||||||||
(1) The fourth quarter of fiscal 2012 contained 14 weeks, as compared to the fourth quarter of fiscal 2011, which contained 13 weeks.
(2) EBITDA and Adjusted EBITDA have been presented in this document as supplemental measures of financial performance that are not required by, or presented in accordance with, GAAP. We define EBITDA as net income before interest, taxes, depreciation, and amortization. Adjusted EBITDA is calculated in accordance with the Secured Term Loan Facility and the Revolving Credit Facility and is the basis for performance evaluation under our executive compensation programs. Adjusted EBITDA reflects further adjustments to EBITDA to eliminate the impact of certain items, including certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance from period to period as discussed further below.
EBITDA and Adjusted EBITDA are included in this document because they are key metrics used by management, our board of directors, and LGP to assess our financial performance. EBITDA and Adjusted EBITDA are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. In addition to executive performance evaluations, we use Adjusted EBITDA to supplement GAAP measures of performance for our income statement, to make budgeting decisions, and to compare our performance against that of other peer
64
companies using similar measures. We believe that Adjusted EBITDA provides useful supplemental information facilitating operating performance comparisons from period to period and company to company. In addition, we use Adjusted EBITDA: (i) to evaluate the effectiveness of our business strategies and (ii) because the Secured Term Loan Facility and the Revolving Credit Facility use a measure substantially the same as Adjusted EBITDA to measure our compliance with certain covenants.
EBITDA and Adjusted EBITDA are not GAAP measures of our financial performance or liquidity and should not be considered as alternatives to net income (loss) as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP and they should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management's discretionary use, as they do not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures, store openings and certain other cash costs that may recur in the future. EBITDA and Adjusted EBITDA contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating Adjusted EBITDA, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as pre-opening costs, stock compensation expense, and losses on extinguishment of debt. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using EBITDA and Adjusted EBITDA supplementally. Our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
A reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is set forth below:
|
Fiscal 2011 | Fiscal 2012 | Fiscal 2013 | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
First Quarter |
|||||||||||||||||||
Net income (loss) |
$ | (5,358 | ) | $ | 1,774 | $ | 3,265 | $ | (30,352 | ) | $ | (11,964 | ) | $ | 1,871 | $ | 3,600 | $ | 6,362 | $ | (5,329 | ) | ||||||
Depreciation and amortization |
6,560 | 6,715 | 6,883 | 7,293 | 7,254 | 7,235 | 7,336 | 7,725 | 7,470 | |||||||||||||||||||
Interest expense |
6,646 | 6,136 | 6,222 | 6,413 | 5,798 | 5,092 | 5,131 | 5,367 | 5,555 | |||||||||||||||||||
Income tax expense (benefit) |
176 | 284 | 559 | (2,394 | ) | (3,160 | ) | 1,171 | 1,551 | (4,010 | ) | (1,844 | ) | |||||||||||||||
EBITDA |
$ | 8,024 | $ | 14,909 | $ | 16,929 | $ | (19,040 | ) | $ | (2,072 | ) | $ | 15,369 | $ | 17,618 | $ | 15,444 | $ | 5,852 | ||||||||
Management fees(a) |
0 | 0 | 250 | 250 | 250 | 250 | 250 | 250 | 250 | |||||||||||||||||||
Pre-opening costs*(b) |
157 | 985 | 2,682 | 1,175 | 1,661 | 2,775 | 2,137 | 989 | 1,962 | |||||||||||||||||||
Goodwill and trade name impairment+(c) |
0 | 0 | 0 | 47,037 | 0 | 0 | 0 | 15,533 | 0 | |||||||||||||||||||
Non-cash rent(d) |
480 | 534 | 428 | 493 | 442 | 864 | 433 | 276 | 391 | |||||||||||||||||||
Restructuring charges+(e) |
0 | 0 | 54 | 79 | 494 | 1,815 | 2,056 | 2,004 | 241 | |||||||||||||||||||
Long-lived asset impairment(f) |
0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||
Stock compensation expense(g) |
0 | 0 | 0 | 0 | 0 | 0 | 157 | 126 | 99 | |||||||||||||||||||
Loss on extinguishment of debt*(h) |
0 | 0 | 0 | 0 | 7,236 | 93 | 4 | 0 | 1,101 | |||||||||||||||||||
Foreign exchange (gains) losses(i) |
(199 | ) | (24 | ) | 14 | 143 | (15 | ) | 459 | (563 | ) | 174 | 94 | |||||||||||||||
Other adjustments(j) |
24 | 22 | 23 | 215 | 261 | 257 | 366 | 194 | 243 | |||||||||||||||||||
Adjusted EBITDA |
$ | 8,486 | $ | 16,426 | $ | 20,380 | $ | 30,352 | $ | 8,257 | $ | 21,882 | $ | 22,456 | $ | 34,990 | $ | 10,233 | ||||||||||
(a) Fees paid to LGP in accordance with our management services agreement, which will terminate on the closing of this offering.
(b) Non-capital expenditures associated with opening new stores and relocating stores. Prior to fiscal 2012, the amount of pre-opening costs permitted pursuant to the terms of the Revolving Credit Facility and the Senior Secured Term Loan Facility to be included in the calculation of Adjusted EBITDA was limited to $5.0 million, and the limit was increased to $10.0 million in April 2012. Similar limits exist in our compensation plan. We adjust for these costs to facilitate comparisons of store operating performance from period to period.
(c) Non-cash charges related to impairment of intangible assets, primarily related to Elfa, which we do not consider reflective of our ongoing performance.
(d) Reflects the extent to which our annual GAAP rent expense has been above or below our cash rent payment due to lease accounting adjustments. The adjustment varies depending on the average age of our lease portfolio (weighted for size), as our GAAP expense on younger leases typically exceeds our cash cost, while our GAAP expense on older leases is typically less than cash cost. Although our GAAP rent expense has exceeded our cash rent payments through our last fiscal year, as our lease portfolio matures we expect our cash rent payments to exceed our GAAP rent expense, beginning in fiscal 2013.
(e) Includes charges incurred to restructure business operations at Elfa, including the closure of a sales subsidiary in the Netherlands in 2008, the closure of a sales subsidiary in Germany and a manufacturing facility in Norway in 2012, as well as the relocation of certain head office functions in sales and marketing from the Västervik, Sweden, manufacturing location to the group headquarters in Malmö, Sweden in 2012, which we do not consider reflective of our ongoing performance.
(f) Non-cash charges related to impairment of long-lived tangible assets in our Elfa segment.
(g) Non-cash charges related to stock-based compensation programs, which vary from period to period depending on timing of awards. We adjust for these charges to facilitate comparisons from period to period.
(h) Loss recorded as a result of the repayment of the Prior Senior Secured Term Loan Facility and senior subordinated notes in April 2012, which we do not consider reflective of our ongoing operations, and the April 2013 amendment to the Senior Secured Term Loan Facility. We expect to incur a similar charge in connection with our repayment of a portion of the borrowings under the Senior Secured Term Loan Facility with the proceeds of this offering.
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(i) Realized foreign exchange transactional gains/losses in all periods.
(j) Other adjustments include amounts our management believes are not representative of our ongoing operations, including costs incurred in preparations for this offering and other charges.
Seasonality
Our business is moderately seasonal in nature. Our storage and organization product offering makes us less susceptible to holiday shopping seasonal patterns than many retailers. In addition, our marketing plan is designed to minimize volatility and seasonal fluctuations of sales across periods. Historically, our business has realized a higher portion of net sales, operating income and cash flows from operations in the fourth fiscal quarter, attributable primarily to the impact of our Annual elfa® Sale (which starts on December 24th and runs through early February). In addition, our Annual Shelving Sale occurs in the third fiscal quarter and results in historically higher sales, operating income and cash flows from operations for the period. As a result of these factors, working capital requirements and demands on our product distribution and delivery network fluctuate during the year, and are greatest in the second and third fiscal quarters as we prepare for our Annual Shelving Sale, the holiday selling season, and our Annual elfa® Sale.
Liquidity and capital resources
We rely on cash flows from operations and the Revolving Credit Facility as our primary sources of liquidity. Our primary cash needs are for merchandise inventories, direct materials, payroll, store rent, capital expenditures associated with opening new stores and updating existing stores, as well as information technology and infrastructure, including distribution center and Elfa manufacturing facility enhancements. The most significant components of our operating assets and liabilities are merchandise inventories, accounts receivable, prepaid expenses and other assets, accounts payable, other current and non-current liabilities, taxes receivable and taxes payable. Our liquidity is seasonal as a result of our building inventory for key selling periods, and as a result, our borrowings are generally higher during these periods when compared to the rest of our fiscal year. Our borrowings generally increase in our second and third fiscal quarters as we prepare for the Annual elfa® Sale which is in our fourth fiscal quarter. We believe that cash expected to be generated from operations, and the availability of borrowings under the Revolving Credit Facility or other financing arrangements, will be sufficient to meet liquidity requirements, anticipated capital expenditures and payments due under our existing credit facilities for at least the next 24 months.
At June 1, 2013, we had $13.7 million of cash and cash equivalents and $54.4 million in borrowing availability under our Revolving Credit Facility. There were $2.8 million in letters of credit outstanding under the Revolving Credit Facility at that date.
Cash flow analysis
A summary of our operating, investing and financing activities are shown in the following table:
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|
|
|
Thirteen weeks ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Fiscal year | |||||||||||||||
|
May 26, 2012 |
June 1 2013 |
||||||||||||||
(in thousands) |
2010 |
2011 |
2012 |
|||||||||||||
Net cash provided by (used in) operating activities |
$ | 48,764 | $ | 42,470 | $ | 45,186 | $ | (10,513 | ) | $ | (7,478 | ) | ||||
Net cash used in investing activities |
(18,157 | ) | (41,470 | ) | (48,245 | ) | (11,247 | ) | (8,859 | ) | ||||||
Net cash provided by (used in) financing activities |
(7,243 | ) | 167 | (22,642 | ) | (11,308 | ) | 4,880 | ||||||||
Effect of exchange rate changes on cash |
230 | 240 | (111 | ) | (530 | ) | (191 | ) | ||||||||
Increase (decrease) in cash and cash equivalents |
$ | 23,594 | $ | 1,407 | $ | (25,812 | ) | $ | (33,598 | ) | $ | (11,648 | ) | |||
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Net cash provided by (used in) operating activities
Cash from operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, deferred taxes and the effect of changes in operating assets and liabilities.
Our operating cash flow requirements are generally highest in our seasonally slowest first quarter. Net cash used in operating activities was $10,513 and $7,478 for the first three months of fiscal 2012 and fiscal 2013, respectively. The $3,035 decrease in fiscal 2013 compared to fiscal 2012 was due primarily to the substantial reduction of net loss and was offset by lower working capital. Operating assets and liabilities decreased $1,341 in the first three months of 2013 as decreases in merchandise inventories, accounts receivable, and prepaid expenses were offset by decreases in accounts payable and income taxes payable.
Net cash provided by operating activities was $45,186 and $42,470 for fiscal 2012 and fiscal 2011, respectively, as non-cash items (primarily impairment charges relating to Elfa, as discussed above) more than offset net losses. The $2,716 increase in fiscal 2012 compared to fiscal 2011 was due to the improvement in working capital as well as the increased benefit of non-cash items. Operating assets and liabilities increased $1,446 in fiscal 2012. Merchandise inventory, accounts receivable, and prepaid expenses all increased year-over-year, which was offset by increases in accounts payable and income taxes payable.
Net cash used in investing activities
Investing activities consist primarily of capital expenditures for new store openings, existing store remodels, infrastructure, information systems, and our distribution center.
Capital expenditures for the first three months of fiscal 2013 were $9,246 with new store openings and existing store remodels accounting for the majority of spending at $6,045. The remaining capital expenditures of $3,201 in the first three months of fiscal 2013 were primarily for investments in information technology, our corporate offices and our distribution center. We expect to open six new stores during 2013 (including one store relocation), three of which have already opened. We expect to have capital expenditures of approximately $45 million in fiscal 2013, primarily related to our efforts to open new stores, remodel existing stores and support existing and future infrastructure, including our information systems and our distribution center.
Our total capital expenditures for fiscal 2012 were $48,559 with new store openings and existing store remodels accounting for the majority of spending at $28,225. The remaining capital expenditures of $20,334 in fiscal 2012 were primarily for investments in information technology, our corporate offices and distribution center and Elfa manufacturing facility enhancements.
Net cash provided by financing activities
Financing activities consist primarily of borrowings and payments under our Senior Secured Credit Facility and our Revolving Credit Facility.
Net cash provided by financing activities was $4,880 in the first three months of fiscal 2013. This included the net proceeds of $5,129 from borrowings under the Elfa Revolving Credit Facility to support higher liquidity needs as well as net proceeds of $5,000 from borrowings under the Revolving Credit Facility, also to support higher liquidity needs. In addition, The Container Store, Inc. increased its borrowings under the Senior Secured Term Facility by $90.0 million pursuant to the Increase and Repricing Transactions, which was used to finance a dividend distribution to holders of our senior preferred stock.
Net cash used for financing activities was $22,642 in fiscal 2012. This included net proceeds of $2,108 from borrowings under the Elfa Revolving Credit Facility to support higher working capital needs. The net
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proceeds of the revolver borrowings at Elfa were offset by payments of $24,569 cash for repayment of indebtedness outstanding under the Elfa Term Loan Facility, the Senior Secured Term Loan Facility and the Revolving Credit Facility, as well as additional debt repayment and transaction costs associated with the Refinancing Transactions.
As of June 1, 2013, we had a total of $54,433 of unused borrowing availability under the Revolving Credit Facility, $5,000 in outstanding borrowings under the Revolving Credit Facility and $2,793 in letters of credit issued under the Revolving Credit Facility.
As of June 1, 2013, Elfa had a total of $8,249 of unused borrowing availability under its revolving credit facility and $18,178 outstanding under its revolving credit facility.
Senior Secured Term Loan Facility
On April 6, 2012, The Container Store, Inc. entered into the $275.0 million Senior Secured Term Loan Facility with JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Barclays Bank PLC, Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, N.A., as Co-Documentation Agents. Prior to the Increase and Repricing Transactions, as discussed below, borrowings under the Senior Secured Term Loan Facility accrued interest at LIBOR+5.0%, subject to a LIBOR floor of 1.25%.
We used proceeds from the Senior Secured Term Loan Facility, along with $20.0 million in cash, to extinguish the outstanding amounts under the Prior Senior Secured Term Loan Facility of $115.4 million and The Container Store, Inc.'s senior subordinated notes of $165.5 million.
On April 8, 2013, The Container Store, Inc. entered into the Increase and Repricing Transactions, which were effected pursuant to an amendment to the Senior Secured Term Loan Facility. Under this amendment, the borrowings under the Senior Secured Term Loan Facility were increased to $362.3 million. Following the Increase and Repricing Transactions, borrowings under the Senior Secured Term Loan Facility bear interest at a rate of LIBOR + 4.25%, subject to a LIBOR floor of 1.25%, and the maturity date remains as April 6, 2019. Additionally, the amendment eliminated the senior secured leverage ratio covenant referenced below. Pursuant to the amendment, we are required to make quarterly principal repayments of $0.9 million through December 31, 2018, with a balloon payment for the remaining balance of $341.4 million due on April 6, 2019. The additional $90.0 million of borrowings was used to finance a dividend distribution to holders of our senior preferred stock in the amount of $90.0 million, which was paid on April 9, 2013.
The Senior Secured Term Loan Facility is secured by (a) a first priority security interest in substantially all of our assets (excluding stock in foreign subsidiaries in excess of 65% and assets of non-guarantors and subject to certain other exceptions) (other than the collateral that secures the Revolving Credit Facility described below on a first-priority basis) and (b) a security interest, junior in priority, in the assets securing the Revolving Credit Facility described below on a first-priority basis. Obligations under the Senior Secured Term Loan Facility are guaranteed by each of The Container Store Group, Inc. and The Container Store Group, Inc.'s U.S. subsidiaries. Originally, we were required to maintain a senior secured leverage ratio covenant, however as discussed above, this covenant was removed on April 8, 2013. The ratio was tested as of the last day of each fiscal quarter. The initial permitted maximum for this ratio was 5.25 to 1.00 and the requirement stepped down over time to 3.75 to 1.00. We were compliant with this financial covenant at March 2, 2013. Under the Senior Secured Term Loan Facility, we were required to make quarterly principal repayments of $0.7 million through December 31, 2018, with a balloon payment for the remaining balance of $256.4 million due on April 6, 2019. As noted above, this was modified in April 2013 in connection with the Increase and Repricing Transactions.
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The Senior Secured Term Loan Facility contains a number of covenants that, among other things, restrict our ability, subject to specified exceptions, to incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve itself, engage in businesses that are not in a related line of business; make loans, advances or guarantees; engage in transactions with affiliates; and make investments. In addition, the financing agreements contain certain cross-default provisions. As of June 1, 2013, we were in compliance with all covenants and no Event of Default (as such term is defined in the the Senior Secured Term Loan Facility) had occurred.
Revolving Credit Facility
On April 6, 2012, The Container Store, Inc. entered into the $75.0 million Revolving Credit Facility with JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, and Wells Fargo Bank, N.A., as Syndication Agent. Borrowings under the Revolving Credit Facility accrue interest at LIBOR+1.25% to 1.75%, subject to adjustment based on average daily excess availability over the preceding quarter, and the maturity date is April 6, 2017. The Revolving Credit Facility replaced The Container Store, Inc.'s prior $75.0 million asset-based revolving credit facility.
The Revolving Credit Facility is to be used for working capital and other general corporate purposes. The Revolving Credit Facility allows for swing line advances to The Container Store, Inc. of up to $7.5 million and the issuance of letters of credit to us of up to $20.0 million. The availability of credit at any given time under the Revolving Credit Facility is limited by reference to a borrowing base formula based upon numerous factors, including the value of eligible inventory, eligible accounts receivable, and reserves established by the administrative agent. As a result of the borrowing base formula, the actual borrowing availability under the Revolving Credit Facility could be less than the stated amount of the Revolving Credit Facility (as reduced by the actual borrowings and outstanding letters of credit under the Revolving Credit Facility).
The Revolving Credit Facility is secured by (a) a first-priority security interest in all of our personal property, consisting of inventory, accounts receivable, cash, deposit accounts, and other general intangibles, and (b) a second-priority security interest in the collateral that secures the Senior Secured Term Loan Facility on a first-priority basis, as described above (excluding stock in foreign subsidiaries in excess of 65%, and assets of non-guarantor subsidiaries and subject to certain other exceptions). Obligations under the Revolving Credit Facility are guaranteed by each of The Container Store Group, Inc. and The Container Store Group, Inc.'s U.S. subsidiaries.
The Revolving Credit Facility contains a number of covenants that, among other things, restrict our ability, subject to specified exceptions, to incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve itself, engage in businesses that are not in a related line of business; make loans, advances or guarantees; engage in transactions with affiliates; and make investments. In addition, the financing agreements contain certain cross-default provisions. We are required to maintain a consolidated fixed-charge coverage ratio of 1.0 to 1.0 if excess availability is less than $10 million at any time. As of June 1, 2013, we were in compliance with all covenants and no Event of Default (as such term is defined in the Revolving Credit Facility) has occurred.
Elfa Senior Secured Credit Facilities
On April 27, 2009, Elfa entered into the Elfa Senior Secured Credit Facilities with Tjustbygdens Sparbank AB, which we refer to as Sparbank, which consist of a SEK 137,500,000 (approximately $20.8 million as of June 1, 2013) term loan facility, which we refer to as the Elfa Term Loan Facility, and a SEK 175,000,000
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(approximately $26.4 million as of June 1, 2013) revolving credit facility, which we refer to as the Elfa Revolving Credit Facility and, together with the Elfa Term Loan Facility, the Elfa Senior Secured Credit Facilities. On January 27, 2012, Sparbank transferred all of its commitments, rights and obligations under the Elfa Senior Secured Credit Facilities to Swedbank AB. Borrowings under the Elfa Senior Secured Credit Facilities accrue interest at a rate of STIBOR+1.775%. The Elfa Term Loan Facility matures on August 30, 2014 and the Elfa Revolving Credit Facility matures on August 30, 2013, subject to automatic annual renewal as long as certain conditions are satisfied. Elfa is required to make quarterly principal repayments under the Elfa Term Loan Facility of SEK 6,250,000 (approximately $0.9 million as of June 1, 2013) through maturity.
The Elfa Senior Secured Credit Facilities are secured by first priority security interests in substantially all of Elfa's assets.
The Elfa Senior Secured Credit Facilities contains a number of covenants that, among other things, restrict Elfa's ability, subject to specified exceptions, to incur additional liens, sell or dispose of assets, pay dividends, merge with other companies, engage in businesses that are not in a related line of business and make guarantees. In addition, Elfa is required to maintain (i) a consolidated equity ratio (calculated as Elfa's consolidated total shareholders' equity divided by its consolidated total assets) of not less than 35% and (ii) a consolidated ratio of net debt to EBITDA (as defined in the Elfa Senior Secured Credit Facilities) not greater than 4.0, each tested as of the end of each quarter. As of June 1, 2013 Elfa was in compliance with all covenants and no Event of Default (as defined in the Elfa Senior Secured Credit Facilities) had occurred.
Events of default under the Elfa Senior Secured Credit Facilities include, but are not limited to: (i) nonpayment of any amount due under the credit agreement; (ii) failure to perform or observe covenants; (iii) nonpayment of any other amount owed to the lender; (iv) certain cross-defaults to other indebtedness; (v) bankruptcy or insolvency of Elfa or any of its subsidiaries; (vi) attachment of any assets of Elfa or any of its subsidiaries; and (vii) the occurrence of any other circumstances which give the lender reasonable grounds to assume that Elfa's conditions or ability to perform its obligations under the Elfa Senior Secured Credit Facilities have deteriorated significantly.
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Contractual obligations
We enter into long-term obligations and commitments in the normal course of business, primarily debt obligations and non-cancelable operating leases. As of March 2, 2013, without giving effect to this offering, our contractual cash obligations over the next several periods were as follows:
|
Payments due by period | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
(in thousands) |
Total |
Fiscal 2013 |
Fiscal 2014-2015 |
Fiscal 2016-2017 |
Thereafter |
|||||||||||
Term loans(1) |
$ | 278,750 | $ | 6,625 | $ | 7,437 | $ | 5,500 | $ | 259,188 | ||||||
Revolving loans |
13,482 | 13,482 | | | | |||||||||||
Other long-term obligations(2) |
6,621 | 2,398 | 2,109 | 501 | 1,613 | |||||||||||
Estimated interest(1)(3) |
106,297 | 17,482 | 34,345 | 33,641 | 20,829 | |||||||||||
Operating leases(4) |
470,436 | 62,521 | 123,530 | 109,782 | 174,603 | |||||||||||
Letters of credit |
2,793 | 2,793 | | | | |||||||||||
Purchase obligations(5) |
29,421 | 29,421 | | | | |||||||||||
Forward contracts(6) |
31,845 | 31,845 | | | | |||||||||||
Total |
$ | 939,645 | $ | 166,567 | $ | 167,421 | $ | 149,424 | $ | 456,233 | ||||||
(1) On April 8, 2013, we executed an amendment to the Senior Secured Term Loan Facility (which we refer to as the Increase and Repricing Transaction), whereby additional term loans in the amount of $90.0 million were borrowed. As a result, our contractual cash obligations for term loans and estimated interest increased as follows:
(in thousands) |
Term loans |
Estimated interest |
|||||
---|---|---|---|---|---|---|---|
Remainder of 2013 |
$ | 6,592 | $ | 20,424 | |||
2014-2015 |
9,182 | 40,444 | |||||
2016-2017 |
7,245 | 39,614 | |||||
Thereafter |
345,043 | 21,589 | |||||
Total |
$ | 368,062 | $ | 122,071 | |||
(2) Other long-term obligations include a mortgage on a manufacturing facility in Poland, as well as a note payable related to the acquisition of The Container Store Services, LLC in 2012.
(3) For purposes of this table, interest has been estimated based on interest rates in effect for our indebtedness as of March 2, 2013, and estimated borrowing levels in the future. Actual borrowing levels and interest costs may differ.
(4) We enter into operating leases during the normal course of business. Most lease arrangements provide us with the option to renew the leases at defined terms. The future operating lease obligations would change if we were to exercise these options, or if we were to enter into additional operating leases.
(5) Purchase obligations related to merchandise inventory.
(6) We enter into foreign currency forward contracts in Swedish krona to stabilize our retail gross margins and to protect our domestic operations from downward currency exposure by hedging purchases of inventory from our Elfa segment.
Off-balance sheet arrangements
None.
Critical accounting policies and estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions about future events that affect amounts reported in our consolidated financial statements and related notes, as well as the related disclosure of contingent assets and liabilities at the date of the financial statements. Management evaluates its accounting policies, estimates, and judgments on an on-going basis. Management bases its estimates and judgments on historical experience and various other factors that are believed to be
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reasonable under the circumstances. Actual results may differ from these estimates under different assumptions and conditions.
Management evaluated the development and selection of its critical accounting policies and estimates and believes that the following involve a higher degree of judgment or complexity and are most significant to reporting our results of operations and financial position, and are therefore discussed as critical. The following critical accounting policies reflect the significant estimates and judgments used in the preparation of our consolidated financial statements. With respect to critical accounting policies, even a relatively minor variance between actual and expected experience can potentially have a materially favorable or unfavorable impact on subsequent results of operations. More information on all of our significant accounting policies can be found in Note 1Nature of Business and Summary of Significant Accounting Policies to our audited consolidated financial statements included elsewhere in this prospectus.
Revenue recognition
We recognize revenues and the related cost of goods sold for our TCS segment when merchandise is received by our customers, which reflects an estimate of shipments that have not yet been received by the customer. This estimate is based on shipping terms and historical delivery times. We recognize revenues and the related cost of goods sold for our Elfa Segment upon shipment.
We recognize shipping and handling fees as revenue when the merchandise is shipped to the customer. Costs of shipping and handling are included in cost of goods sold. We recognize installation fees as revenue upon completion of the installation service to the customer. Costs of installation are included in cost of goods sold.
Sales tax collected is not recognized as revenue as it is ultimately remitted to governmental authorities.
We reserve for projected merchandise returns based on historical experience and various other assumptions that we believe to be reasonable. The reserve reduces sales and cost of sales, accordingly. Merchandise exchanges of similar product and price are not considered merchandise returns and, therefore, are excluded when calculating the sales returns reserve.
Gift cards and merchandise credits
We sell gift cards to our customers in our stores, online and through our call center. We issue merchandise credits in our stores and through our call center. Revenue associated with sales of gift cards and issuances of merchandise credits is recognized when the gift card or merchandise credit is redeemed by the customer, or when the likelihood of redemption by the customer is remote (i.e., breakage). An estimate of the rate of gift card breakage is applied over the period of estimated performance (48 months as of the end of 2012) and the breakage amounts are included in net sales in the consolidated statement of operations.
Inventories
Inventories at retail stores are comprised of finished goods and are valued at the lower of cost or market, with cost determined on a weighted-average cost method including associated freight costs, and market determined based on the estimated net realizable value. Manufacturing inventories are comprised of raw materials, work in process, and finished goods and are valued on a first-in, first out basis using full absorption accounting which includes material, labor, other variable costs, and other applicable manufacturing overhead. To determine if the value of inventory is recoverable at cost, we consider current and anticipated demand, customer preference and the merchandise age. The significant estimates used in
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inventory valuation are obsolescence (including excess and slow-moving inventory) and estimates of inventory shrinkage. We adjust our inventory for obsolescence based on historical trends, aging reports, specific identification and our estimates of future retail sales prices.
Reserves for shrinkage are estimated and recorded throughout the period as a percentage of cost of sales based on historical shrinkage results and current inventory levels. Actual shrinkage is recorded throughout the year based upon periodic cycle counts. Actual inventory shrinkage can vary from estimates due to factors including the mix of our inventory and execution against loss prevention initiatives in our stores and distribution center.
Due to these factors, our obsolescence and shrinkage reserves contain uncertainties. Both estimates have calculations that require management to make assumptions and to apply judgments regarding a number of factors, including market conditions, the selling environment, historical results and current inventory trends. If actual obsolescence or shrinkage estimates change from our original estimates, we will adjust our inventory reserves accordingly throughout the period. Management does not believe that changes in the assumptions used in these estimates would have a significant effect on our inventory balances. We have not made any material changes to our assumptions included in the calculations of the obsolescence and shrinkage reserves during the periods presented.
Income taxes
We account for deferred income taxes utilizing Financial Accounting Standards Board Accounting Standards Codification ("ASC") 740, Income Taxes. ASC 740 requires an asset and liability approach, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. When a net deferred asset position exists, such as with our TCS segment, a three-year cumulative financial loss before income taxes is indicative that realization of a deferred tax asset is in doubt. As a result, valuation allowances are established against deferred tax assets when it is more-likely-than-not that the realization of those deferred tax assets will not occur. Valuation allowances are released as positive evidence of future taxable income sufficient to realize the underlying deferred tax assets becomes available (e.g., three-year cumulative financial income).
Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in the tax rate is recognized through continuing operations in the period that includes the enactment of the change. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future.
We operate in certain jurisdictions outside the United States. ASC 740-30 provides that the undistributed earnings of a foreign subsidiary be accounted for as a temporary difference under the presumption that all undistributed earnings will be distributed to the parent company as a dividend. Sufficient evidence of the intent to permanently reinvest the earnings in the jurisdiction where earned precludes a company from recording the temporary difference. For purposes of ASC 740-30, we are partially reinvested in Elfa and thus do not record a temporary difference. We are partially reinvested since we have permanently reinvested our past earnings at Elfa; however, we do not assert that all future earnings will be reinvested into Elfa.
Leases
Rent expense on operating leases, including rent holidays and scheduled rent increases, is recorded on a straight-line basis over the term of the lease, commencing on the date we take possession of the leased
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property. Rent expense is recorded in selling, general and administrative expenses. Pre-opening rent expense is recorded in pre-opening costs in the consolidated statement of operations. The net excess of rent expense over the actual cash paid has been recorded as deferred rent in the accompanying consolidated balance sheets. Tenant improvement allowances are also included in the accompanying consolidated balance sheets as deferred rent liabilities and are amortized as a reduction of rent expense over the term of the lease from the possession date. Contingent rental payments, typically based on a percentage of sales, are recognized in rent expense when payment of the contingent rent is probable.
Intangibles and long-lived assets
Goodwill
We evaluate goodwill annually to determine whether it is impaired. Goodwill is also tested between annual impairment tests if an event occurs or circumstances change that would indicate that the fair value of a reporting unit is less than its carrying amount. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset. If an impairment indicator exists, we test the intangible asset for recoverability. We have identified two reporting units and we have selected the fourth fiscal quarter to perform our annual goodwill impairment testing.
Prior to testing goodwill for impairment, we perform a qualitative assessment to determine whether it is more likely than not that goodwill is impaired for each reporting unit. If the results of the qualitative assessment indicate that the likelihood of impairment is greater than 50%, then we perform a two-step impairment test on goodwill. In the first step, we compare the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit's goodwill. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.
The fair value of each reporting unit is determined by using a discounted cash flow analysis using the income approach. We also use a market approach to compare the estimated fair value to comparable companies. The determination of fair value requires assumptions and estimates of many critical factors, including among others, our nature and our history, financial and economic conditions affecting us, our industry and the general economy, past results, our current operations and future prospects, sales of similar businesses or capital stock of publicly held similar businesses, as well as prices, terms and conditions affecting past sales of similar businesses. Forecasts of future operations are based, in part, on operating results and management's expectations as to future market conditions. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies. If actual results are not consistent with our estimates and assumptions, we may be exposed to future impairment losses that could be material.
Our tests for impairment of goodwill resulted in a determination that the fair value of the Elfa reporting unit was less than the carrying value in fiscal 2011 and fiscal 2010.
Trade names
We annually evaluate whether the trade names continue to have an indefinite life. Trade names are reviewed for impairment annually in the fourth quarter and may be reviewed more frequently if indicators
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of impairment are present. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, a product recall or an adverse action or assessment by a regulator.
The impairment review is performed by comparing the carrying value to the estimated fair value, determined using a discounted cash flow methodology. If the recorded carrying value of the trade name exceeds its estimated fair value, an impairment charge is recorded to write the trade name down to its estimated fair value. Factors used in the valuation of intangible assets with indefinite lives include, but are not limited to, future revenue growth assumptions, estimated market royalty rates that could be derived from the licensing of our trade names to third parties, and a rate used to discount the estimated royalty cash flow projections to their present value (or estimated fair value).
The valuation of trade names requires assumptions and estimates of many critical factors, which are consistent with the factors discussed under "Goodwill" above. Forecasts of future operations are based, in part, on operating results and management's expectations as to future market conditions. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies. If actual results are not consistent with our estimates and assumptions, we may be exposed to future impairment losses that could be material.
Long-lived assets
Long-lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, a product recall or an adverse action or assessment by a regulator. If the sum of the estimated undiscounted future cash flows related to the asset are less than the carrying value, we recognize a loss equal to the difference between the carrying value and the fair value, usually determined by the estimated undiscounted cash flow analysis of the asset.
For our TCS segment, we evaluate long-lived tangible assets at an individual store level, which is the lowest level at which independent cash flows can be identified. We evaluate corporate assets or other long-lived assets that are not store-specific at the consolidated level. For our Elfa segment, we evaluate long-lived tangible assets at an individual subsidiary level.
Since there is typically no active market for our long-lived tangible assets, we estimate fair values based on the expected future cash flows. We estimate future cash flows based on store-level historical results, current trends, and operating and cash flow projections. Our estimates are subject to uncertainty and may be affected by a number of factors outside our control, including general economic conditions and the competitive environment. While we believe our estimates and judgments about future cash flows are reasonable, future impairment charges may be required if the expected cash flow estimates, as projected, do not occur or if events change requiring us to revise our estimates.
Foreign currency forward contracts
We account for foreign currency forward contracts in accordance with ASC No. 815, Derivatives and Hedging. We utilize foreign currency forward contracts in Swedish krona to stabilize our retail gross margins and to protect our domestic operations from downward currency exposure by hedging purchases of inventory from Elfa. All currency-related hedge instruments have terms from 1 to 12 months and require us to exchange currencies at agreed-upon rates at settlement. We do not hold or enter into financial
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instruments for trading or speculative purposes. We record all financial instruments on a gross basis. We account for all foreign currency forward contracts as cash flow hedges, as defined. All financial instruments are recorded on the consolidated balance sheet at fair value. Changes in fair value that are considered to be effective are recorded in other comprehensive income (loss) until the hedged item (inventory) is sold to the customer, at which time the deferred gain or loss is recognized through cost of sales. Any portion of a change in the fair value that is considered to be ineffective is immediately recorded in earnings as cost of sales.
Recently issued accounting pronouncements
On February 5, 2013, the FASB ratified ASU No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." The new disclosure requirements mandate that entities report, in one place, information about reclassifications out of Accumulated other comprehensive income (loss) ("AOCI"). The standard requires disclosure of the amount of the reclassification and the effect of the reclassification on the income statement line item. Upon adoption, the reclassification disclosures must be presented, in one place, either parenthetically on the face of the statement where net income is presented or in the notes. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012, and we adopted this ASU during first quarter 2013. This ASU did not have a material effect on our financial position or results of operations, but did change our disclosure policies for amounts reclassified out of AOCI.
Jumpstart Our Business Startups Act of 2012
The JOBS Act permits us, as an "emerging growth company," to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to "opt out" of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.
Quantitative and qualitative disclosure of market risk
Foreign currency risk
We are subject to foreign currency risk in connection with the operations of Elfa. All assets and liabilities of foreign subsidiaries are translated at year end rates of exchange, with the exception of certain assets and liabilities that are translated at historical rates of exchange. Revenues, expenses, and cash flows of foreign subsidiaries are translated at weighted-average rates of exchange for the year. Based on the average exchange rate from Swedish krona to U.S. dollar during the first thirteen weeks of fiscal 2013, and results of operations and financial condition in functional currency, we do not believe that a 10% change in the exchange rate would have a material effect on our consolidated results of operations or financial condition.
We are also subject to foreign currency risk in connection with the purchase of inventory from Elfa. We utilize foreign currency forward contracts to mitigate this risk. In fiscal 2012 and fiscal 2011, we used forward contracts for 85% and 77% of inventory purchases in Swedish krona each year, respectively. For fiscal 2013, we currently have 64% of our planned purchases hedged at an average SEK rate of 6.17, compared to 90% of planned purchases hedged in fiscal 2012 at an average rate of 7.08.
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Interest rate risk
We are subject to interest rate risk in connection with borrowings under the Senior Secured Term Loan Facility, the Revolving Credit Facility and the Elfa Senior Secured Credit Facilities, which accrue interest at variable rates. At June 1, 2013, borrowings subject to interest rate risk were $390.1 million, we had $54.4 million of additional availability under the Revolving Credit Facility and approximately $8.2 million of additional availability under the Elfa Revolving Credit Facility. We currently do not engage in any interest rate hedging activity and currently have no intention to do so in the foreseeable future. Based on the average interest rate on each of the Revolving Credit Facility and the Elfa Revolving Credit Facility during the first thirteen weeks of fiscal 2013, and to the extent that borrowings were outstanding, we do not believe that a 10% change in the interest rate would have a material effect on our consolidated results of operations or financial condition.
Impact of Inflation
Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we believe the effects of inflation, if any, on our results of operations and financial condition have been immaterial.
Changes in and disagreements with accountants on accounting and financial disclosure
None.
Internal control over financial reporting
The process of improving our internal controls has required and will continue to require us to expend significant resources to design, implement and maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. There can be no assurance that any actions we take will be completely successful. We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an on-going basis. As part of this process, we may identify specific internal controls as being deficient.
We have begun documenting and testing our internal control procedures in order to comply with the requirements of Section 404 of the Sarbanes-Oxley Act. Section 404 requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent auditors addressing these assessments; however, for so long as we qualify as an emerging growth company, we will not be required to engage an auditor to report on our internal controls over financial reporting. We must comply with Section 404 no later than the time we file our annual report for fiscal 2014 with the SEC.
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Letter from our Chairman and Chief Executive Officer
To our prospective shareholders,
As we celebrate our 35th anniversary this year, I am thrilled, honored and proud to be writing this letter to you.
Since 1978, The Container Store has been working toward creating a retail store experience that is unlike any othera differentiated shopping experience offering customers innovative, time and space-saving solutions coupled with astonishing customer service from happy, well-trained, well-paid salespeople. We hope you and yours have had the opportunity to enjoy it. And if you haven't, I'd love nothing more than for you to take a trip to one of our stores around the country to see what we're talking about. A store that can change your life? Well, yes, we hope so.
Our yummy cultureWhat we stand for
How to define The Container Store culture? I would have to say that first and foremost we're an employee-first, yummy company. "What does it mean to be yummy?" might be your next question. Well, it's the opposite of yucky. We know our employee-first mantra defies conventional business wisdom, most famously expressed by the late American economist Milton Friedman. Milton said the only reason a corporation exists is to maximize the return of the shareholder. Well, with all due respect to Milton, at The Container Store we have found that if you take better care of the employees than anybody else, they really will take better care of the customers than anybody else. It's actually about creating this one-of-a-kind experience, where we operate our business with a focus on all of our stakeholdersbut with our employees first.
This results in a culture where employees get out of bed and actually look forward to coming to workto work alongside other great people. It's a purpose to improve our customers' lives through the gracious gift of organization, to help our vendors' businesses become all they hope and dream they can be, and to make our communities a better place to live. And in doing this, all by staying true to our seven Foundation Principles, which I'll tell you even more about later, we know that the lives of everyone associated with our business will be enriched, filled with opportunity and EVERYONEall of our stakeholderscan thrive.
People often say (and I mean often), "How does The Container Store do it? How have you always been considered a great place to work (and we're talking retail), and how can you compete against the mass merchants and all of the knockoffs you've seen over the years?" My response always points to the culture and our Foundation Principles. We trust that the most sophisticated investors understand that our culture is what drives the value of our businessyes, the culture. In all that we do every single day we keep a laser-like focus on developing and nurturing our culture.
It means that when we asked our employees to describe in a word The Container Store's culture, they shared things like love, passion, family, sweet, security, support, mindful, magical and matchless. Love and sweet and mindfulin business? Now that warms my heart and is something we're incredibly proud and passionate about.
One of our greatest hopes is that the practice of simultaneously taking care of everyone connected to a business, operating from a purpose beyond profits and leading with consciousnesswhat we along with
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other companies, thought leaders and academics call Conscious Capitalism®becomes the preferred and most accepted way of doing business. It will prove that the economic imperatives of corporate success aren't incompatible with doing the right things. It's not a zero-sum game. No one has to lose for the other person to win. You can make decisions based on love and succeed.
Our foundation principles
In order to achieve all of this, our business is structured around some very basic and fundamental values and business philosophies about treating employees, customers and vendors with respect and dignitywe call them our Foundation Principles.
They were formalized in 1988, after we opened our Houston store. That store made us take a look at our business a little harder. From the day we opened the doors, the store did more business than we ever anticipated, which became quite overwhelming to our Houston store employees.
So I referred to a file I had started many years ago called my "philosophy epistle file" where I'd put various anecdotes, musings and philosophical phrases that I admired beginning in high school, through college and up to this time in the business. I chose many examples to communicate the message that no matter how big the company became, its guiding principles and values would stay the same and over the years these were condensed into our Foundation Principles.
By understanding and supporting these principles and philosophical guidelines, everyone can all respond in unison to similar circumstances. In other words, they act as a unit, all working in the same direction toward the same goal. Retail is far, far too situational to attempt to achieve a concerted effort through inflexible rules and policies.
So, instead of using the typical phone-book-sized retail procedural manual to guide our decision making, all of us at The Container Store use our Foundation Principles to keep everyone on track, focused and fulfilled as employees. With this combination of values-driven business philosophies and a one-of-a-kind product selection, The Container Store's goal is to become the best retail store in America.
"1 Equals 3" is our hiring philosophy. One great person equals three good people in terms of business productivity. We have to be selective when interviewing potential employees because of the brand promise we've made to our customers to provide exceptional customer service.
We believe that Communication IS Leadershipthey are one and the same. The Container Store knows the importance of executing every day, consistent, reliable, predictable, effective, thoughtful, compassionate and yes, even courteous communication. It's hard, but we feel passionate that it is critical in developing and growing our business successfully.
This statement has become a Golden Rule of our companyit's our business philosophy. The Container Store has been successful in creatively crafting mutually beneficial relationships with our vendors by doing everything possible to truly "fill their baskets to the brim." We know that in return, they will support us and assist in our success as well.
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Conventional wisdom says that price is mutually exclusive of service and selection. It's hard for most retailers to offer competitive pricing and provide exceptional service. A few great retailers have achieved a combination of the best selection and the best service. To add competitive pricing to that equation is generally unheard of, but The Container Store works hard to achieve all three simultaneously with this philosophy.
This is our training philosophy and demonstrates how committed we are in arming our employees with the knowledge to provide the best possible service to our customers. We want our employees to use their intuition, which I heard someone once say is the sum total of your life experiences, so why would you want them to leave that at home when they come to work? In order to successfully anticipate the needs of our customers, we encourage our employees to use their intuition coupled with the enormous training they receive on our products. We are the experts and must ensure our customers feel more than taken care of by us.
This is our selling philosophy and we use it to illustrate how we astonish our customers by exceeding their expectations. When a customer comes to our store looking for shoe storage, for example, we equate her to a "Man in a Desert," in desperate need of a complete solution (not just a drink of water). We start asking questions about what her needs are. "How many shoes do you have?" "If shoes are a big problem for you, how does the rest of the closet function?" By anticipating her needs, we know that she needs an organization plana complete solutionfor her entire closet.
Three steps in the door and you can tell whether or not a retail store has it. And we know that The Container Store has it! "Air of Excitement" is our employees' smiling faces and genuine concern for customers' needs. It's the bright, visual, innovative and conversation-provoking products we sell. It's our clean, well-organized shelves. It's music that is pleasant and speaks to our customers.
The customer dance
It's all of these wonderful Foundation Principles that, working together, create that differentiated shopping experience. That customer experience is not just about any one thing. It's a very complex and powerful mix of so many things. But the ultimate reward, the validation that the experience was successful is what we call getting the customer dance. It's everything about the customer experience that happens in the store and continues on after that customer gets home. Her heart rate goes up, up, up with every interaction with the brand. It's about what occurs when she takes the product home and actually lives with it. We want her to do a little dance every time she opens that closet door in the morning because it's so beautifully organized. So perfect for her. Frankly, she feels an emotional connection to her closet. The productthe solutionit transcends value for her.
And the dance is really happening when she has her friends, sister-in-law and neighbor over to see her closet and they want to feel that way every morning so they make a trip to The Container Store to find out how they can experience that feeling. I've had customers tell me over and over again how our stores are a
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peaceful, organized oasis after a really stressful day or, even better, after a trip to our store they say It was more fun than Disneyland.
Our customers don't just like The Container Storethey say they love us. It's the ultimate achievement in building a brand when the people associated with it don't just enjoy the brand, they somehow feel a part of it.
Continuing to lead with heart and soul
I'm excited about the work we have ahead of uswhether it's in the stores that are yet to be built or in the products of the future that will continue to help our customers save space and time. We'll continue to create boundless opportunities for our employees and they will be enriched by working around other inspiring, fantastic colleagues. We will continue to work closely with our vendors, building our businesses togetherand we will have customers continuing to dance in their closets with delight. All of our stakeholders will enjoy The Container Store's purpose in action.
My favorite movie is It's a Wonderful Life. I know it's kind of corny, but the whole movie is about showing one guy, George Bailey, the power of his wake. At The Container Store, we talk a lot about WAKElike a boat's wake. I really believe that being a CONSCIOUS business means that everyone is aware of their wake. And I think that all of our wakes are much, much bigger than we can ever, ever imagine. We have built a culture that champions a collective focus on our wake, team, mutual support and respect, grace of authority and servant leadership and leadership based on love rather than fear. We believe The Container Store's magic will continue to flourish in our next step as a public company.
We've come a long way over the last 35 yearsfrom my dad's friends scratching their heads about us opening a store that sells "empty boxes" to originating and now leading the storage and organization category of retailing to being at or near the top of FORTUNE Magazine's "100 Best Companies To Work For" the last 14 years in a row (we were #1 twice). We've been one of Oprah's "Favorite Things" during her farewell season and most recently achieved positive quarterly comps for 12 consecutive quarters as of fiscal May. But our heart and soul, our devotion to operating a conscious business has never wavered. It's what makes The Container Store matchlessand something I'm excited to say continues to strengthen with every step we take in our extraordinary journey.
We will continue to innovate, trail blaze, astonish and thrill. And we will continue to work hard and create opportunity for everyone associated with our business. But, if the RPM needle ever gets in the red and our precious, yummy culture is in need of a bit of a hug, we'll stop and give it the love it deserves and needs. For love is what The Container Store's past, present and future is built on.
I sure wouldn't want to miss our futurewould you? We hope you'll join us!
Kip
Tindell
Chairman and Chief Executive Officer
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Company overview
We are the leading specialty retailer of storage and organization products in the United States, with over $700 million of net sales in fiscal 2012. We are the original storage and organization specialty retailer and the only national retailer solely devoted to the category. Our goal is to help provide order to an increasingly busy and chaotic world. We provide creative, multifunctional, customizable storage and organization solutions that help our customers save time, save space and improve the quality of their lives. We believe our commitment to the category, breadth of product assortment, passionate employees and focus on solutions-based selling create a long-lasting bond with our customers and foster devotion to The Container Store brand. As a result, we continue to expand our base of passionate, enthusiastic and loyal customers, which we believe will further drive our growth and profitability.
We foster an employee-first culture built around our Foundation Principles, which are described on the inside cover of this prospectus and in the letter from William A. "Kip" Tindell, III, our Chairman and Chief Executive Officer, to prospective shareholders appearing on page 78. The Foundation Principles define how we approach our relationships with our employees, vendors, customers and communities and influence every aspect of our business.
Our business was established with one store in Dallas, Texas in 1978. Today our operations consist of two reporting segments:
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The passion and dedication of our employees, management team and vendor network allows us to successfully execute our business strategy. We believe our culture and conscious business approach ultimately drive our strong financial performance, as demonstrated by:
Our competitive strengths
Deep-rooted, employee-first culture. We believe our highly-trained, experienced and motivated employees are critical to delivering our solutions-based retail experience to our customers. Taking care of our employees is The Container Store's top priority, so we continually invest in their recruitment, training and overall job satisfaction. We believe that these investments result in high employee retention rates, inspired service and an enhanced customer experience that differentiates us from other retailers.
We are highly selective in our hiring process, typically hiring less than 4% of annual applicants, and often our new employees are existing customers. We train our employees extensively and continuously throughout their employment. Each new full-time store employee receives more than 260 hours of formal training in their first year alone, which we believe to be far beyond the industry average. Training focuses on our culture, leadership skills, product knowledge, space design skills and operational skills. In addition, we offer flexible work schedules, comprehensive benefits and above industry average compensation to both full and part-time employees. As a result, we have an average full-time employee turn-over rate of approximately 10% annually, compared to an industry average of over 100%, and we have been recognized in FORTUNE Magazine's list of "100 Best Companies To Work For®" in each of the last 14 years.
An unmatched collection of storage and organization products. We offer our customers storage and organization solutions through an extensive and carefully curated assortment of creative and original products at competitive prices. We accomplish this in three principal ways:
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Highly-differentiated shopping experience. We place great emphasis on creating an inviting and engaging store experience. Our customers often come to The Container Store knowing that they have a storage and organization challenge, but without a clear plan of how to address and solve their underlying issue. Our highly-trained salespeople seek to interact with our customers, asking questions, listening and learning from them so that they can understand the complete scope of their needs. This allows us to provide our customers with creative, tailored, comprehensive and multifunctional solutions, often utilizing multiple products from many of the 16 distinct lifestyle departments in our stores. This selling approach allows us to sell a broader range of products and to deliver a differentiated experience to our customers, which we believe results in a higher average ticket, repeat visits and frequent referrals to other potential customers.
Our interactive customer service experience is further enhanced by a variety of additional service offerings, including our elfa® Installation Service, GoShop! Click & Pickup (in which a customer orders online and picks up at a store with curbside delivery to the customer's car in most markets) and GoShop! Scan & Deliver in the Manhattan market (in which a customer simply scans her products with a hand-held device, checks out, after which the merchandise is delivered to her home). These services and, in the case of GoShop! Click & Pickup and GoShop! Scan & Deliver, advanced technologies, provide additional convenience and flexibility to our customers and reinforce our commitment to providing a differentiated shopping experience.
Proven real estate site selection process. We seek to locate our stores in highly desirable retail developments surrounded by dense concentrations of our core customers. We maintain a disciplined approach to new store development and perform comprehensive market research before selecting a new site based on customer demographics from eSite, an independent customer analytics research firm, and data from our customer database to identify existing customers. Additionally, we maintain a flexible cost structure that allows us to achieve consistent four-wall Adjusted EBITDA margins across a range of sales levels and successfully operate stores in a variety of markets. Our data-driven approach, premium locations and flexible new store model have resulted in strong performance across our store base. We have never closed a store due to underperformance.
We have deep relationships with best-in-class commercial real estate firms and believe that we are a sought-after tenant given our brand and the high volume of affluent customers that visit our stores. As a result, we continue to have access to desirable retail sites on attractive terms.
Powerful brand with strong customer loyalty. We believe that The Container Store brand has become synonymous with the storage and organization category and an organized, stress-reduced lifestyle. The strength of our brand is built on our history as the originator and leader of the storage and organization category, our best-in-class product offerings and our commitment to our employees, vendors, customers and communities. We believe that this makes us the preferred retail destination for storage and organization solutions.
We have achieved nationwide recognition attributable in part to numerous news and media impressions. We are consistently presented with opportunities to showcase our brand on a national stage. Notable
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publicity includes appearances on "Oprah's Favorite Things" in her farewell season in 2010 and on "Ellen's 12 Days of Christmas" in 2012. In addition, we received the National Retail Federation's Gold Medal Award for excellence in 2011. The prominence of our brand has also led to a significant number of unpaid media impressions, including print mentions in newspapers and magazines with more than 520 million readers and television broadcast mentions on shows with more than 270 million viewers in 2012. We also enjoy a strong following on various social media outlets including Facebook (over 200,000 "likes"), Twitter (over 20,000 followers) and Pinterest (over 22,000 followers), in each case as of July 1, 2013.
Highly experienced and passionate management team with proven track record. Led by our Chairman and Chief Executive Officer, William A. "Kip" Tindell, III, our senior management team averages over 19 years with The Container Store, and is responsible for our proven track record of growth and consistent performance. Both Kip and Sharon Tindell, our Chief Merchandising Officer, have been inducted into the Retailing Hall of Fame, Melissa Reiff, our President and Chief Operating Officer, joined the team in 1995 and has been instrumental in elevating and leading the organization through its sizable expansion over the past two decades. Kip, Sharon, Melissa and the rest of the management team are dedicated to maintaining our employee-first culture and crafting mutually beneficial relationships with all of our stakeholders, which we believe will lead to continued growth and value creation in the future.
Our growth strategy
The key elements of our growth strategy include:
Expanding our store base. We believe that our expansion opportunities in the United States are significant. Our current footprint of 61 stores extends to 22 states and the District of Columbia. We expect to open six new stores during fiscal 2013 (including of one store relocation), three of which have already opened, and an additional six new stores in fiscal 2014 (including one store relocation). Based on research conducted for us by eSite, we believe that we can grow our current U.S. store footprint to at least 300 stores in our current format. We have adopted a disciplined expansion strategy designed to leverage the strength of our business model and nationally recognized brand name to successfully develop new stores in an array of markets that are primed for growth, including new, existing, small and large markets. While our current expansion focus is on domestic markets, we believe international expansion may provide additional growth opportunities for us in the future.
Historically, our new store openings have been highly successful due in part to our new store opening execution strategy, which involves months of hiring, training and preparation and culminates in a multi-day grand opening celebration in partnership with a local charity. This distinctive approach enables our new stores to deliver strong sales volumes quickly and results in shorter new store pre-tax payback periods. The average four-wall Adjusted EBITDA margin was 21.5% in the first twelve months of operation and the average pre-tax payback period was approximately 2.5 years for our 12 new stores that opened from fiscal 2008 through fiscal 2011.
Driving comparable store sales growth. We have achieved comparable store sales growth in each of the past twelve fiscal quarters (through May 2013) and have increased our average ticket by 7.5% during the same period. We believe that we can continue to grow our comparable store sales by driving store traffic, improving customer conversion and growing our average ticket by continuing to provide a differentiated shopping experience through our solutions-based selling approach, new product and service introductions and well-maintained stores. Our employees receive continuous training on our products to ensure that our customers are sold complete solutions rather than individual products. We also believe that our high levels of service will continue to drive increased sales of the products in our higher margin elfa® department and complete space design solutions. We believe that these factors, combined with our continuous focus on
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further increasing brand awareness, will attract new customers and increase loyalty with existing customers.
Enhancing and growing multi-channel presence. In addition to our retail stores, we also offer our products directly to our customers through our fully-integrated website and call center, which collectively accounted for 5.4% of TCS net sales in fiscal 2012. Through continual technology enhancements and innovative services, such as GoShop! Click & Pickup, we believe we are well positioned for continued growth in our direct sales channels. Our website and call center sales have increased 84% from fiscal 2008 to fiscal 2012, including 25% growth in fiscal 2012.
Increasing brand awareness. We will continue to promote our brand by constantly communicating our message of organized and stress-reduced living to our current and potential customers. We do this through our comprehensive marketing strategy, which includes direct mail, advertising, online, public relations and social media. Our Customer Relationship Management ("CRM") strategy allows us to target our marketing efforts through direct mail and email. This strategy is supported by our customer database of over 14 million customer households, which includes customer transaction data and demographic overlays that help us better understand customer behaviors and identify opportunities. Additionally, our marketing and brand building efforts are enhanced by an on-going dialogue with our customers through growing social and mobile channels including Facebook, Twitter, Pinterest and Instagram.
As a part of our commitment to Conscious Capitalism®, we focus on serving the local communities in which we operate. We provide donations, gift cards and storage and organization makeovers to a variety of local nonprofit organizations to show our support for the organizations that are important to our customers. Additionally, when opening each new store, we partner with a prominent local non-profit organization, working together to welcome the new store to the community. We host a grand opening party on the Thursday night before the Saturday on which the store opens, and donate 10% of our initial Saturday and Sunday sales from that new store to our non-profit partner. As we continue to grow our store base, we plan to continue our active partnerships with local non-profit organizations in order to build a sense of community with our customers and promote The Container Store brand.
Improving profitability. We believe that the expected expansion of our store base and the expected growth in comparable store sales will result in improved Adjusted EBITDA margins as we take advantage of economies of scale in products sourcing and leverage our existing infrastructure, supply chain, corporate overhead and other fixed costs. We also expect to maintain our disciplined pricing approach, which involves strategic promotional campaigns with limited use of traditional markdowns or discounting.
What we stand forOrganization with heart
Since our inception, we have developed a distinctive corporate culture with a mission to help provide order to an increasingly busy and chaotic world. We operate under a set of core values that places our employees first and promotes our seven Foundation Principles, which influence and guide every aspect of our business. We believe motivated and well-trained employees lead to satisfied customers who, in turn, drive the growth and success of our business. By promoting these core values, we encourage our employees to work in unison toward a common goal of providing the best retail experience for our customers.
We proudly practice Conscious Capitalism® and strive to create an environment that can simultaneously create value for all of our stakeholders, including our employees, customers, vendors, communities and shareholders. Our commitment to this operating philosophy is built around cultivating caring, long-term relationships with our employees, vendors and customers. We believe that fostering an environment where
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everyone can thrive is the right way to do business and the best way to generate long-term profitable growth.
We believe our relationship with our employees, at all levels of the organization, is excellent and a key contributor to our success. We believe the knowledge and passion of our employees allows us to deliver our solutions-based retail experience to our customers and strengthens our brand loyalty. We believe motivated and well-trained employees lead to satisfied customers who, in turn, lead to increased revenues and profitability.
Our stores
Retail stores
Our stores present our products in a unique and engaging atmosphere. Our visual merchandising team works to ensure that all of our merchandise is appropriately showcased to highlight the value and functionality of our products and maximize the appeal of our image and brand. We maintain a consistent store layout which creates a familiar shopping experience across our store base. Our stores are clean and spacious with strict, orderly merchandising and strategic product placements to optimize our selling space and increase productivity. We utilize display samples and demonstrations, including inspirational elfa® solutions, which foster customer interaction with products and add to the air of excitement in our stores. We maintain a hands-on, solutions-based service approach and further enhance the store experience with convenient, time-saving and value-added services, including free closet design with elfa®, free in-store demonstrations, our GoShop! Click & Pickup service (in which a customer orders online and picks up at a store) with curbside delivery to the customer's car in most markets, and our GoShop! Scan & Deliver service in the Manhattan market (in which a customer simply scans her products with a hand-held device, checks out, after which the merchandise is delivered to her home).
Based on research conducted for us by eSite, an independent customer analytics research firm, we believe that we can grow our current U.S. store footprint to at least 300 stores in our current format. Our unit growth is supported by our new store economics, which we believe to be compelling. A typical location has approximately 19,000 square feet of selling space. Our average total initial cash investment consisted of approximately $0.4 million for initial inventory, approximately $1.0 million for cash pre- and grand opening expenses and approximately $1.8 million for capital investment, net of tenant allowances, for our 12 new stores that opened from fiscal 2008 through fiscal 2011. Those same 12 new stores had an average four-wall adjusted EBITDA margin of 21.5% in the first twelve months of operation, an average pre-tax payback period of approximately 2.5 years and an average annualized return on invested capital of 55.9%.
E-commerce
We are a fully-integrated multi-channel retailer. Our website, containerstore.com, is intended to replicate the store experience as much as possible and offers the same product assortment found in the stores, as well as certain products found exclusively online. Additionally, our website allows our customers to provide product ratings and reviews which our merchandising team reads, responds to and incorporates into product design discussions with vendors. Our average product rating for the time period between January 2010 when the tracking of product ratings was first initiated and July 2013 was 4.7 stars out of 5. The website also provides convenient service offerings, including online design services, practical tips and advice, video demonstration, Live Chat, GoShop! Click & Pickup, GoShop! Click & Deliver and Gift Registry. We also maintain a website optimized for mobile devices and a call center to support our e-commerce business.
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Our products
Strategy
Our goal is to be the destination for all of our customers' storage and organizational needs. We focus on offering the most extensive, dynamic and unique product selection in the storage and organization industry. We achieve this through our broad merchandise assortment, frequent new product introductions and meaningful proportion of proprietary and exclusive merchandise. We seek to showcase the merchandise in our stores and online to highlight the value and functionality of our products and maximize the appeal of our image and brand. Our merchandising team continually monitors historical sales trends and new product launches to keep our stores' offerings fresh and relevant to our customers, working closely with our vendors to create new products exclusively for us to supplement our best selling products and continue to evolve our product offering. We maintain a disciplined approach to pricing and merchandising, which involves strategic promotional campaigns with limited use of traditional markdowns and discounting.
We believe the exclusivity of our products and our solutions-based selling approach strengthens our position as a leader and a trendsetter in the industry. We estimate that over half of our net sales in fiscal 2012 were from merchandise exclusive to The Container Store. Many of these products are our own brands, including our elfa® products. We seek to introduce every customer to elfa® and provide them with custom design and installation services. We believe the high level of customer service we deliver allows us to effectively market and sell our elfa® products in a way that differentiates us and supports our market leadership in the sector.
The goal of our solutions-based selling approach is to provide each customer with a comprehensive solution that fits her needs. We believe our solutions-based approach offers a unique shopping experience for our customer. By offering complete organizational solutions, our customer can find everything she needs within our stores.
Products
Our stores are typically organized into 16 distinct lifestyle departments as follows:
Lifestyle departments |
Select products |
|
---|---|---|
Bath | Countertop Organizers, Cosmetic and Jewelry Organizers, Shower and Bathtub Organizers, Drawer Organization, Cabinet Storage | |
Box |
Corrugated Boxes, Packing Material, Tape, Storage Bags, Specialty Boxes |
|
Closets |
Shoe Racks, Hangers, Drawer Organizers, Boxes and Bins, Hanging Storage Bags, Garment Racks |
|
Collections |
Media Storage, Photo Storage, Display, Small Craft and Parts Organizers |
|
Containers |
Small Boxes, Small Baskets, Tins, Divided Boxes, Decorative Containers |
|
elfa® |
Wall and Door Rack Systems, Drawer Systems and Accessories, Ventilated and Sold Shelving Systems, Utility and Garage Systems |
|
Food Storage |
Canisters, Jars, Lunchtime Essentials, Bulk Food Storage, Plastic and Glass Food Storage |
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Lifestyle departments |
Select products |
|
---|---|---|
Gift Packaging | Gift Wrap and Tags, Ribbons and Bows, Gift Wrap Organizers, Gift Bags and Sacks, Gift Boxes | |
Hooks |
Wall Mounted, Self Adhesive, Magnetic, Overdoor, Removable |
|
Kitchen |
Drawer Liners and Organizers, Countertop Organizers, Dish Drying Racks, Cabinet Storage, Pantry Organizers |
|
Laundry |
Step Stools, Hampers, Laundry Bags and Baskets, Clothes Drying Racks, Cleaning Tools |
|
Office |
Desktop Collections, Paper Storage, File Carts and Cabinets, Literature Organizers, Message Boards |
|
Shelving |
Free Standing Shelving, Wall Mounted Shelving, Cube Systems, Component Shelving, Desks, Chairs |
|
Storage |
Drawers, Boxes and Bins, Totes, Crates, Carts |
|
Trash |
Recycle Bins, Wastebaskets, Open Cans, Step on Cans, Bags |
|
Travel |
Luggage, Totes, Clothing Organizers, Cosmetic and Jewelry Organizers, Travel Bottles |
|
Sourcing
We purchased merchandise from approximately 700 different vendors and for the TCS segment, our top 10 vendors, excluding Elfa, accounted for less than 30% of our total purchases in fiscal 2012. In order to maximize our purchasing flexibility, we do not enter into long-term contracts with any of our vendors. Accordingly, we generally operate without any contractual assurances of continued supply, pricing or access to new products. We strive to form meaningful, long-lasting and mutually beneficial relationships with our vendors. We are collaborative in our vendor negotiations so as to develop a partnership with our vendors and, in time, a sense of loyalty to The Container Store. Seventeen of our top 20 vendors have been with us for at least 10 years and several of those vendors have been with us since our inception in 1978.
Distribution
In the TCS segment, all of our merchandise flows through a centralized distribution center prior to transport to our retail stores. Our distribution center is co-located with our corporate offices in Coppell, Texas. The approximately 1,100,000 square foot facility was designed and constructed specifically for The Container Store and is comprised of approximately 78,000 square feet of corporate office space and over 1,000,000 square feet of warehouse space (of which approximately 900,000 square feet are currently in use). With the exception of the Dallas / Fort Worth market, we utilize third party carriers to transport all of our products to our stores.
Our Coppell, TX distribution center uses a state-of-the-art warehouse management system that is designed to optimize every aspect of distribution operations, from picking and packing to slotting and labor management. We recently invested in this new system in order to provide us with the control and flexibility that we believe is required for first-class inventory management. Further, so as to minimize the amount of time our retail stores have to spend managing inventory, all of the merchandise in our distribution center is prepared to be sales floor ready (ticketed with price tags and store replenishment
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packaging) prior to transport to our stores. We believe that this system allows our employees to concentrate on what matters most, which is understanding our customers' needs and providing them with tailored solutions and a differentiated shopping experience. We emphasize safety and efficiency and have received numerous operational awards in recognition of our distribution center's high standards. We believe that the size and scalability of the distribution center, in addition to the currently unused space, is more than sufficient to support our future expansion over the next 4 to 5 years.
Elfa utilizes a broad network of third-party carriers to deliver products from its manufacturing facilities to customers worldwide.
Marketing and advertising
Our marketing and advertising strategy seeks to promote our brand, culture and values to new and existing customers. Our goal is to develop a continuous dialogue with our core customers in order to remain relevant in their lives and be top-of-mind when it comes to storage and organization solutions.
Our strategy centers on our Working Marketing Plan, an integrated 18-month forward-looking plan for all upcoming initiatives viewable by all employees at any time through our intranet and maintained by our marketing team. The Working Marketing Plan allows functional areas from across the entire company to collaborate in order to support our marketing programs. Sales goals, staffing, inventory logistics, product development, visual merchandising and expense planning all revolve around this dynamic plan, which is updated on a weekly basis.
We employ a wide array of traditional and online media on a national and local level, including direct mail, online marketing, print, outdoor, broadcast and mobile. Our traditional media advertising resulted in 1.4 billion paid media impressions in fiscal 2012. The prominence of our brand has also led to a significant number of unpaid media impressions, including print mentions in newspapers and magazines with more than 520 million readers and television broadcast mentions on shows with more than 270 million viewers in 2012. In addition, we take a proactive approach to public relations through national, local and trade media outlets. Notable publicity includes appearances on "Oprah's Favorite Things" in her farewell season in 2010 and on "Ellen's 12 Days of Christmas" in 2012. Direct mail is the largest component of our marketing strategy as it is the most targeted way to reach our customers. We have developed a robust database of over 14 million households, of which two million have been active over the past 12 months as of July 1, 2013. The database includes customer transaction information and demographic and segment overlays, which help us to better understand key customer behaviors and assist in identifying current and future opportunities.
We maintain an active social media program and have developed a strong presence on various social media platforms including Facebook (over 200,000 "likes"), Twitter (over 20,000 followers) and Pinterest (over 22,000 followers), in each case as of July 1, 2013. Additionally, we promote our unique culture and approach to Conscious Capitalism® through our blog, standfor.containerstore.com. Our blog communicates what we stand for to our customers, vendors, employees and communities, our Foundation Principles and our commitment to practicing Conscious Capitalism®. We believe in working hard to create an environment where the lives of everyone connected to our business are enriched and can thrive.
Hiring, training and motivating our employees
As of July 1, 2013, we had approximately 5,000 total employees. TCS employees accounted for approximately 4,400 of this total, of which 3,100 were part-time employees. TCS employees are not subject
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to a collective bargaining agreement. As of July 1, 2013, Elfa and its subsidiaries had approximately 600 employees. As of July 1, 2013, approximately 52% of Elfa's employees (approximately 6% of our total employees) were covered by collective bargaining agreements. We have never experienced a strike or work stoppage, and we believe that our relations with employees are excellent.
We believe that the recruitment, training and knowledge of our employees and the consistency and quality of the service they deliver are central to our success. We are highly selective in our hiring process, typically hiring less than 4% of annual applicants. Most of our employees are college-educated and often our new employees are existing customers. We endeavor to hire employees with similar sophistication, skills and life experiences as our customers, with the goal of having our employees relate to our customers in the selling environment. We believe our employee-customer interaction is important to build the trust and rapport necessary to execute our solutions-based selling approach. The recruiting department relies on external marketing, employee recommendations and our website to facilitate recruitment of future employees.
We dedicate substantial resources to training. Each new full-time store employee receives more than 260 hours of formal training in their first year alone, including product, leadership, cultural and operational training. Our sales associates are trained to interact, inquire and listen to customers so that they can understand the complete scope of each customer's situation. We believe this approach allows us to provide creative, tailored, comprehensive and multifunctional solutions, often utilizing multiple products from several of the 16 distinct lifestyle departments in our stores. This selling approach allows us to sell a broader range of products and deliver a differentiated experience to our customers, which we believe results in a higher average ticket, repeat visits and frequent referrals.
Given the level of investment that each employee receives in terms of training, we are committed to retaining each of our employees. We believe that communication is vital to the culture of the business and engages and empowers our workforce. Our financial performance, strategic initiatives and organizational successes are communicated to employees at all levels. We also pride ourselves on our compensation policy as a retention tool. We offer flexible work schedules, comprehensive benefits and above industry average compensation to both full and part-time employees. As a result, we have an average full-time employee turn-over rate of approximately 10% annually, compared to an industry average of over 100%, and we have been recognized in FORTUNE Magazine's list of "100 Best Companies To Work For®" in each of the last 14 years.
Properties
We lease all of our 61 retail stores. Our leases generally have a term of 10 to 15 years, with renewal options that generally range from 5 to 15 years. Most leases for our retail stores provide for a minimum rent, typically including escalating rent increases, plus a percentage rent based upon sales after certain minimum thresholds are achieved. The leases generally require us to pay insurance, utilities, real estate
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taxes and repair and maintenance expenses. A summary of our store locations by state as of July 1, 2013 is below:
Location |
Store(s) |
Location |
Store(s) |
Location |
Store(s) |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Arizona |
1 | Maryland |
1 | Ohio |
2 | |||||||||
Arkansas |
1 | Massachusetts |
3 | Oregon |
1 | |||||||||
California |
9 | Minnesota |
1 | Tennessee |
1 | |||||||||
Colorado |
3 | Missouri |
1 | Texas |
12 | |||||||||
Florida |
5 | Nevada |
1 | Virginia |
2 | |||||||||
Georgia |
2 | New Jersey |
2 | Washington |
1 | |||||||||
Illinois |
4 | New York |
4 | District of Columbia |
1 | |||||||||
Indiana |
1 | North Carolina |
2 | |||||||||||
|
Total |
61 | ||||||||||||
We also lease approximately 1.1 million square feet of space in Coppell, Texas for our corporate offices and distribution center for our TCS segment. The initial term for this lease expires in April 2019, and we retain three five-year renewal options.
Elfa leases its approximately 14,000 square foot group headquarters in Malmö, Sweden. In addition, Elfa owns four manufacturing facilities, located in Västervik, Sweden (approximately 200,000 square feet), Koszalin, Poland (approximately 90,000 square feet), Mullsjö, Finland (approximately 100,000 square feet) and Lahti, Finland (60,000 square feet).
Information technology
Our information technology systems are critical to our day-to-day operations as well as to the execution of our long-term strategy. We are committed to using technology in order to help drive growth and enhance business results. We use a combination of industry standard systems along with proprietary systems developed internally to support all areas of our business, including supply chain, merchandising, store operations, point-of-sale, e-commerce, finance, accounting and human resources.
Our systems provide us the real-time data and automation needed to continually improve our operations and customer service levels. Our inventory replenishment system optimizes the flow of inventory throughout our supply chain using advanced forecasting algorithms in order to enhance customer service levels while increasing inventory turns. Furthermore, we use technology to provide an enhanced customer experience such as our proprietary elfa® Custom Design Center software, which allows our customers to virtually design their ideal customized elfa® space. We believe our current systems provide us with the operational efficiencies, customer solutions, scalability, management control and timely reporting that allows us to identify and respond to operating trends in our business. We believe that our systems have the flexibility and capacity to accommodate our future growth plans.
Intellectual property
Our "The Container Store," "Contain Yourself" and "elfa" trademarks and certain variations thereon, such as our "The Container Store" logo and many trademarks used for our product lines and sales campaigns are registered or are the subject of pending trademark applications with the U.S. Patent and Trademark Office and with the trademark registries of many foreign countries. In addition, we own many domain names, including "containerstore.com," "1equals3.com" and others that include our trademarks. We also
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own a patent for our proprietary retail shopping computer systems and copyrights in our catalogs, websites, and other marketing material. We believe that our trademarks, product designs and copyrighted works have significant value and we vigorously protect them against infringement.
Our market and competition
We operate within the storage and organization category, which extends across many retail segments including housewares, office supplies and travel, among others. This category is highly fragmented and The Container Store is the only national retailer solely devoted to it. We believe the category is growing and will continue to grow due, in part, to several favorable demographic trends, including (1) the desire for efficiency and organization of Baby Boomers as they become "empty nesters," (2) the generation of Baby Boomers' children driving demand for organizational products as they move into their first homes and (3) the increase of dual-income families with a need for solutions to organize and simplify their busy lives. Given The Container Store's industry leadership, unmatched product assortment and customer service, and national footprint, we believe we are well positioned to increase our share of this growing category.
We have little direct competition from other national or regional retailers in the storage and organization market. However, we face competition from national, regional and online retailers that devote a smaller portion of their merchandise assortment to storage and organization than our stores, including Bed Bath & Beyond, Target, Crate & Barrel, Walmart, Staples, The Home Depot and Amazon. Some of our competitors are larger and have greater financial, marketing and other resources than The Container Store. We compete with such retailers on the basis of product selection, product quality, brand recognition, price, customer service, effective consumer marketing and promotional activities and the ability to identify and satisfy emerging consumer preferences, among other things. We believe that the strength of our solution based selling with highly trained employees, exclusive offerings and vendor relationships, our passionate and loyal customer base and the quality, differentiation and breadth of product assortment compare favorably to those of our competitors.
Seasonality
Our business is moderately seasonal in nature. Our storage and organization product offering makes us less susceptible to holiday shopping seasonal patterns than many retailers. In addition, our marketing plan is designed to minimize volatility and seasonal fluctuations of sales across periods. Historically, our business has realized a higher portion of net sales, operating income and cash flows from operations in the fourth fiscal quarter, attributable primarily to the impact of our Annual elfa® Sale (which starts on December 24th and runs through early February).
Regulation and legislation
We are subject to labor and employment laws, laws governing truth-in-advertising, privacy laws, safety regulations and other laws, including consumer protection regulations, such as the Consumer Product Safety Improvement Act of 2008, that regulate retailers and govern the promotion and sale of merchandise and the operation of stores and warehouse facilities. We monitor changes in these laws and believe that we are in material compliance with applicable laws.
Legal proceedings
From time to time we are involved in litigation, claims and other proceedings relating to the conduct of our business, including, but not limited to consumer protection class action litigation, claims related to our
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business, employment practices, and claims of intellectual property infringement. In addition, from time to time, we are subject to product liability and personal injury claims for the products that we sell and the stores we operate. Subject to certain exceptions, our purchase orders generally require the vendor to indemnify us against any product liability claims. However, if the vendor does not have insurance or becomes insolvent, we may not be indemnified. In addition, we could face a wide variety of employee claims against us, including general discrimination, privacy, labor and employment, ERISA and disability claims. Any claims could also result in litigation against us and could also result in regulatory proceedings being brought against us by various federal and state agencies that regulate our business, including the U.S. Equal Employment Opportunity Commission. Often these cases raise complex factual and legal issues, which are subject to risks and uncertainties and which could require significant management time. Litigation and other claims and regulatory proceedings against us could result in unexpected expenses and liability and could also materially adversely affect our operations and our reputation.
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Below is a list of the names and ages, as of July 1, 2013, of our directors, director designees and executive officers and a description of the business experience of each of them.
Name |
Age |
Position |
||
---|---|---|---|---|
William A. ("Kip") Tindell, III |
60 | Chief Executive Officer and Chairman of the Board of Directors | ||
Sharon Tindell |
57 | Chief Merchandising Officer and Director | ||
Melissa Reiff |
58 | President, Chief Operating Officer and Director | ||
Jodi Taylor |
50 | Chief Financial Officer | ||
Per von Mentzer |
53 | Chief Executive Officer of Elfa | ||
Jonathan D. Sokoloff |
55 | Director | ||
Timothy J. Flynn |
40 | Director | ||
J. Kristofer Galashan |
35 | Director | ||
Executive officers and directors
William A. ("Kip") Tindell, III has served as our Chief Executive Officer since early 2006 and on our board of directors since August 2007 (and on the board of directors of The Container Store, Inc. since July 1978). He was elected Chairman of our board of directors in August 2007. Mr. Tindell served as President and Chief Operating Officer of The Container Store through 2005. Mr. Tindell was presented the Ernst & Young's prestigious Entrepreneur of the Year award in 1991 and is a recipient of the National Retail Federation's 1998 Innovator of the Year Award. In 2006 he was inducted into the Retailing Hall of Fame and is a 2009 Junior Achievement of Dallas Business Hall of Fame inductee. In 2011 Mr. Tindell received the National Retail Federation's Gold Medal Award, which is generally regarded as the industry's top accolade, given to individuals who have served the industry with distinction and achieved a national reputation for excellence to the retail craft. He is a member of the Dallas Arboretum CEO Advisory Council and serves on the Board of Directors of Whole Foods Market, Inc. (WFM) and Baylor Healthcare Systems Foundation. Mr. Tindell also serves on the executive board of the National Retail Federation as its vice chairman. and served on the Board of Directors of the National Retail Federation Foundation from 2010 to 2013. He serves on the board of Conscious Capitalism Institute and Conscious Capitalism, Inc., a community of like-minded business, thought and academic leaders working to elevate humanity through a conscious approach to business. Mr. Tindell is an active member of the Dallas Salesmanship Club, a nonprofit organization dedicated to transforming children's futures by serving at-risk families in the Greater Dallas area. Mr. Tindell was selected to our board of directors because of the perspective, experience and operational expertise in our business that he has developed as our Chief Executive Officer. Mr. Tindell is married to Sharon Tindell, our Chief Merchandising Officer.
Sharon Tindell has served as our Chief Merchandising Officer since early 2006 and has served on our board of directors since since August 2007 (and on the board of directors of The Container Store, Inc. since April 1988). In 1980 she joined us full-time working on the sales floor, managing inventory and participating in other tasks that put her in direct touch with the store's innovative product mix and customers' storage and organization challenges. In 1981 Ms. Tindell became our first buyer. Ms. Tindell drives our philosophy of developing multi-functional uses for the store's products and is credited with maintaining The Container Store's devotion to its original concept of providing only storage and organization products. Ms. Tindell served as Executive Vice President of Merchandising, beginning in 1992
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and attained the title of Chief Merchandising Officer in August 2006. She is instrumental in creating the brand presence reflected in our store and leads all product decisions, product presentation, signage, store interior and exterior, and merchandising development. In addition, she is the force behind our merchandise supply chain, ultimately responsible for managing inventory levels, inventory turn and margin. In 2006, Ms. Tindell was inducted into the Retailing Hall of Fame, the first woman selected for this honor. Ms. Tindell was selected to our board of directors because she possesses particular knowledge and experience in retail and merchandising as well as our business and our customer. Sharon Tindell is married to William A. "Kip" Tindell, III, our Chief Executive Officer and Chairman of the Board of Directors.
Melissa Reiff has served as our President since early 2006 and has served on our board of directors since August 2007 and more recently became President and Chief Operating Officer in March 2013 (and on the board of directors of The Container Store, Inc. since February 2006). Ms. Reiff joined The Container Store in 1995 as Vice President of Sales and Marketing. She created and formalized our Sales and Marketing department and was responsible for sales management, training, advertising, e-business marketing, public relations and new store grand opening launches. In 2003 Ms. Reiff assumed the role of Executive Vice President of Stores and Marketing, as she was responsible for further integrating the stores and marketing functions. As President and Chief Operating Officer, Ms. Reiff is responsible for the business areas of Store Leadership, Marketing (including Advertising, Online, Customer Relationship Management, Public Relations, Cultural Programs, Community Relations and Social Media), Training and Development, Recruiting, Information Systems, Legal, Loss Prevention and Logistics and Distribution. Ms. Reiff is also credited with enhancing The Container Store's approach to launching new stores. Ms. Reiff has played a critical role in enhancing and strengthening The Container Store's employee-first culture centered around our values-based Foundation Principles. She is a member of the Dallas chapter of the American Marketing Association, International Women's Foundation and C200, an organization of leading women in business dedicated to fostering growth and increasing opportunities for women entrepreneurs and corporate leaders worldwide. She also serves on Southern Methodist University's Cox School of Business Executive Board and is a sustaining member of the Junior League of Dallas. Recently Ms. Reiff was honored with the 2012-2013 SMU Cox School of Business Distinguished Alumna award. Ms. Reiff was selected to our board of directors because she possesses particular knowledge and experience in retail and merchandising, communication and interpersonal skills, as well as our business.
Jodi Taylor has served as our Chief Financial Officer since December 2007. Ms. Taylor is responsible for the business areas of Finance, Accounting, Real Estate, Payroll, Benefits, Travel, New Store and Remodel Process, Store Facilities and Purchasing. She also serves as Secretary to our board of directors. Prior to joining us, Ms. Taylor served as Chief Financial Officer and Secretary from 1998 to 2007 at Harold's, a publicly-traded apparel retailer which filed for bankruptcy in 2008. From 1986-1998, Ms. Taylor was an executive with Baby Superstore, Inc. or successor companies, which after an IPO in 1994, was ultimately acquired by Toys "R" Us, Inc. in 1996. Ms. Taylor was formerly an auditor with Deloitte, Haskins, & Sells (now Deloitte & Touche).
Per von Mentzer joined Elfa as Chief Executive Officer in September 2008 and has been instrumental in managing and overseeing all of Elfa's operations. Prior to joining Elfa, Mr. von Mentzer served as Vice President of Marketing and Sales for Nybron Flooring International, Europe's largest wood flooring group, with sales in more than 30 countries, including the United States and China.
Jonathan D. Sokoloff has served on our board of directors since August 2007. Mr. Sokoloff is currently a Managing Partner with LGP, our majority stockholder, and joined in 1990. Before joining LGP, he was a Managing Director in Investment Banking at Drexel Burnham Lambert. Mr. Sokoloff also serves on the board of the parent holding companies of BJ's Wholesale Club, Shake Shack, and Jetro Cash & Carry and
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serves of the board of Union Square Hospitality Group, LLC, Whole Foods Market, Inc., J.Crew Group, Inc., The Sports Authority, Inc., Brickman Group Holdings, Inc., Jo-Ann Stores, Inc., The Tire Rack, Inc. and Top Shop/Top Man Limited. He co-chairs the Endowment Committee for Private Equity at his alma mater, Williams College. Mr. Sokoloff was selected to our board of directors because he possesses particular knowledge and experience in accounting, finance and capital structure, strategic planning and leadership of complex organizations, retail businesses and board practices of other major corporations.
Timothy J. Flynn has served on our board of directors since August 2007. Mr. Flynn is currently a Partner with LGP, our majority stockholder, and joined the firm in 2003. Prior to joining LGP he had been a Director in the Investment Banking Department of Credit Suisse First Boston (CSFB) in Los Angeles, which he joined in 2000 following CSFB's acquisition of Donaldson, Lufkin & Jenrette (DLJ). Mr. Flynn had been with DLJ since 1996 and had previously worked in the Mergers and Acquisitions group at Paine Webber Inc. in New York. Mr. Flynn also serves on the board of the parent holding company of CCC Information Services and and serves on the board of United States Infrastructure Corp., Tank Holdings Corp. and Del Taco Holdings, Inc. Mr. Flynn was selected to our board of directors because he possesses particular knowledge and experience in accounting, finance and capital structure, strategic planning and leadership of complex organizations, retail businesses and board practices of other major corporations.
J. Kristofer Galashan has served on our board of directors since August 2007. Mr. Galashan is currently a Principal with LGP, our majority stockholder, and joined the firm in 2002. Prior to joining LGP he had been in the Investment Banking Division of Credit Suisse First Boston (CSFB) in Los Angeles which he joined in 2000 following CSFB's acquisition of Donaldson, Lufkin & Jenrette (DLJ). Mr Galashan had been with DLJ since 1999. Mr. Galashan also serves on the board of the parent holding companies of BJ's Wholesale Club and Tourneau and serves on the board of Union Square Hospitality Group, LLC. Mr. Galashan was selected to our board of directors because he possesses particular knowledge and experience in accounting, finance and capital structure, strategic planning and leadership of complex organizations, retail businesses and board practices of other major corporations.
Selection arrangements
Because LGP will continue to control a majority of the voting power of our common stock upon the closing of this offering, we expect that LGP will control the election of our directors.
Corporate governance
Composition of our board of directors
We believe our board of directors should be composed of individuals with sophistication and experience in many substantive areas that impact our business. We believe experience, qualifications or skills in the following areas are most important: retail merchandising; marketing and advertising; consumer goods; sales and distribution; accounting, finance, and capital structure; strategic planning and leadership of complex organizations; legal/regulatory and government affairs; people management; communications and interpersonal skills and board practices of other major corporations. We believe that all of our current board members possess the professional and personal qualifications necessary for board service, and have highlighted particularly noteworthy attributes for each board member in the individual biographies above.
Initially, our board of directors will consist of directors, including our Chief Executive Officer. Our certificate of incorporation, as will be in effect prior to the closing of this offering, will provide that our board of directors shall consist of such number of directors as determined from time to time by resolution adopted by a majority of the total number of authorized directors whether or not there exists any
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vacancies in previously authorized directorships. Any additional directorships resulting from an increase in the number of directors may only be filled by the directors then in office unless otherwise required by law or by a resolution passed by our board of directors. The term of office for each director will be until his or her successor is elected at our annual meeting or his or her death, resignation or removal, whichever is earliest to occur.
Our board of directors will be divided into three classes, with each director serving a three-year term, and one class being elected at each year's annual meeting of stockholders. and will serve as Class I directors with an initial term expiring in 2014. and will serve as Class II directors with an initial term expiring in 2015. , and will serve as Class III directors with an initial term expiring in 2016.
With respect to the roles of Chairman of the Board and Chief Executive Officer, our Corporate Governance Guidelines, as will be in effect prior to the closing of this offering, will provide that the roles may be separated or combined, and our board of directors exercises its discretion in combining or separating these positions as it deems appropriate in light of prevailing circumstances. Our board of directors believes that the combination or separation of these positions should continue to be considered as part of our succession planning process. Currently the roles are combined, with Mr. Tindell serving as Chairman and Chief Executive Officer. Our Corporate Governance Guidelines will provide the flexibility for our board of directors to modify our leadership structure in the future as appropriate. We believe that we, like many U.S. companies, are well-served by this flexible leadership structure.
Upon the closing of this offering, LGP will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a "controlled company" under the New York Stock Exchange corporate governance standards. As a controlled company, exemptions under the standards will mean that we are not required to comply with certain corporate governance requirements, including the following requirements:
These exemptions do not modify the independence requirements for our audit committee, and we intend to comply with the applicable requirements of the Sarbanes-Oxley Act and rules with respect to our audit committee within the applicable time frame.
Director independence
In , 2013, our board of directors undertook a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise that director's ability to exercise independent judgment in carrying out that director's responsibilities. Our board of directors has affirmatively determined that , , ,
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and are each an "independent director," as defined under the rules of the New York Stock Exchange.
Board committees
Prior to the closing of this offering, our board of directors will establish a new audit committee and a new compensation committee, which will replace our current committees, and our board of directors will establish a nominating and corporate governance committee. In the future, our board of directors may establish other committees, as it deems appropriate, to assist it with its responsibilities. The composition, duties and responsibilities of our committees is as set forth below.
Audit committee
The audit committee will be responsible for, among other matters:
Upon the closing of this offering, our audit committee will consist of , and . Rule 10A-3 of the Exchange Act and the New York Stock Exchange rules require us to have one independent audit committee member upon the listing of our common stock on the New York Stock Exchange, a majority of independent directors on our audit committee within 90 days of the date of this prospectus and an audit committee composed entirely of independent directors within one year of the date of this prospectus. Our board of directors has affirmatively determined that meets the definition of "independent director" for purposes of serving on an audit committee under Rule 10A-3 and the New York Stock Exchange rules, and we intend to comply with the other independence requirements within the time periods specified. In addition, our board of directors has determined that will qualify as an "audit committee financial expert," as such term is defined in Item 407(d)(5) of Regulation S-K. Our board of directors will adopt a new written charter for the audit committee, which will be available on our principal corporate website at www.containerstore.com substantially concurrently with the closing of this offering.
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Compensation committee
The compensation committee will be responsible for, among other matters:
Upon the closing of this offering, our compensation committee will consist of and . As a controlled company, we will rely upon the exemption from the requirement that we have a separate compensation committee composed entirely of independent directors. Our board of directors will adopt a new written charter for the compensation committee, which will be available on our principal corporate website at www.containerstore.com substantially concurrently with the closing of this offering.
Nominating and corporate governance committee
The nominating and corporate governance committee will be responsible for, among other matters:
Upon the closing of this offering, our nominating and corporate governance committee will consist of and . As a controlled company, we will rely upon the exemption from the requirement that we have a separate nominating and corporate governance committee composed entirely of independent directors. Our board of directors will adopt a new written charter for the nominating and corporate governance committee, which will be available on our principal corporate website at www.containerstore.com substantially concurrently with the closing of this offering.
Risk oversight
Our board of directors is responsible for overseeing our risk management process. Our board of directors focuses on our general risk management strategy, the most significant risks facing us, and oversees the implementation of risk mitigation strategies by management. Our board of directors is also apprised of particular risk management matters in connection with its general oversight and approval of corporate matters and significant transactions.
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Risk considerations in our compensation program
We conducted an assessment of our compensation policies and practices for our employees and concluded that these policies and practices are not reasonably likely to have a material adverse effect on our Company.
Director compensation
None of our directors received compensation as a director during fiscal 2012. Our board of directors intends to adopt a compensation policy that, effective upon the closing of this offering, will be applicable to all of our non-employee directors. All directors will receive reimbursement for reasonable out-of-pocket expenses incurred in connection with meetings of our board of directors.
Compensation committee interlocks and insider participation
No interlocking relationships exist between the members of our board of directors or compensation committee and the board of directors or compensation committee of any other company.
Code of ethics
We have adopted a code of business conduct and ethics applicable to our principal executive, financial and accounting officers and all persons performing similar functions. A copy of that code will be available on our principal corporate website at www.containerstore.com substantially concurrently with to the closing of this offering. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website.
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The discussion below includes a review of our compensation decisions with respect to fiscal 2012 for our "named executive officers," consisting of our principal executive officer and our two other most highly compensated executive officers. Our named executive officers for fiscal 2012 were:
Fiscal 2012 summary compensation table
The following table shows the compensation earned by our named executive officers during fiscal 2012.
Name and principal position |
Fiscal year |
Salary |
Option awards |
Non-equity incentive plan compensation(2) |
All other compensation(3) |
Total |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
William A. "Kip" Tindell, III | 2012 | $ | 675,000 | $ | | $1,322,000 | $4,500 | $ | 2,001,500 | ||||||||
Chairman and Chief Executive Officer |
|||||||||||||||||
Sharon Tindell | 2012 | 550,000 | | 906,000 | 4,500 | 1,460,500 | |||||||||||
Chief Merchandising Officer |
|||||||||||||||||
Melissa Reiff | 2012 | 550,000 | 324,327 | (1) | 906,000 | 4,500 | 1,784,827 | ||||||||||
President & Chief Operating Officer |
|||||||||||||||||
(1) Reflects the aggregate grant date fair value of the stock options granted to Ms. Reiff in fiscal 2012, computed in accordance with FASB ASC 718, "CompensationStock Compensation ("ASC 718"). See Note 10Stock-Based Compensation to our audited consolidated financial statements included in this prospectus for the assumptions used in valuing such stock options.
(2) The amounts in this column reflect the cash awards paid to the named executive officers in December 2012 and June 2013 under our annual executive bonus program for fiscal 2012 performance described further below.
(3) This column reflects 401(k) matching contributions made to the named executive officers' accounts by us.
Narrative disclosure to summary compensation table
Elements of compensation
In fiscal 2012, we compensated our named executive officers through a combination of base salary, annual cash incentives, long-term equity incentives in the form of stock options and other benefits as described below.
Base salary
The salaries for fiscal 2012 for our named executive officers were determined pursuant to the terms of an employment agreement we entered into with each of them. The original employment agreements were dated as of August 15, 2007. Each of our named executive officers entered into an amended and restated employment agreement on October 31, 2012, effective as of August 15, 2012, as described below.
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Performance-based annual cash incentives
In fiscal 2012, our named executive officers were eligible to receive annual cash bonuses based on percentages of base salary under our Executive Bonus Plan (as defined below). Bonuses were determined using a performance grid based on our Adjusted EBITDA (which is calculated as described further under the heading "Summary Historical and Consolidated Financial and Operating Data"). For fiscal 2012, the minimum level was set at 0% of annual base pay for all three named executives, and the maximum level was set at 277% of annual base pay for Mr. Tindell and 240% of annual base pay for Ms. Tindell and Ms. Reiff. The target level was established at 154% of annual base pay for Mr. Tindell and 130% of annual base pay for Ms. Tindell and Ms. Reiff. The target Adjusted EBITDA level was $82.0 million. Our Adjusted EBITDA was $87.6 million for fiscal 2012, resulting in an award for Mr. Tindell of 196% of his annual base salary and for Ms. Tindell and Ms. Reiff of 165% of their annual base salaries.
With respect to fiscal 2013, the named executive officers continue to participate in our Executive Bonus Plan. Bonuses will be again determined using a performance grid based on Adjusted EBITDA.
Long-term equity incentives
We maintain an equity incentive plan, the 2012 Stock Option Plan of TCS Holdings, Inc. (the "2012 Stock Option Plan"), which provides certain of our employees, including the named executive officers, the opportunity to participate in the equity appreciation of our business. Participants in the 2012 Stock Option Plan receive options to purchase shares of our common stock. On June 20, 2012, we granted stock options to purchase 6,415 shares of our common stock to Ms. Reiff, which, like the stock options granted under the 2012 Stock Option Plan to our other employees, vest in equal installments over five years from the date of grant. Neither of the other named executive officers has been granted stock options under the 2012 Stock Option Plan in light of their existing ownership of our common and preferred stock. The stock options granted under the 2012 Stock Option Plan are expected to remain outstanding following the closing of this offering.
Our named executive officers also purchased certain shares of our common and preferred stock at the time of our acquisition by LGP on August 15, 2007 by means of a rollover transaction involving shares of common stock of The Container Store, Inc. previously owned by them at the time of the acquisition transaction. Mr. Tindell acquired 61,280.75 shares of our common stock, 7,252.588 shares of our senior preferred stock and 7,252.588 shares of our junior preferred stock, Ms. Tindell acquired 62,894.54 shares of our common stock, 7,443.579 shares of our senior preferred stock and 7,443.579 shares of our junior preferred stock and Ms. Reiff acquired 9,508.25 shares of our common stock, 1,125.303 shares of our senior preferred stock and 1,125.303 shares of our junior preferred stock.
Nonqualified deferred compensation plan
Ms. Reiff participates in a nonqualified deferred compensation plan pursuant to which participants may defer up to 50% of their base salaries and up to 100% of their bonuses until termination of employment. All employee contributions and earnings on such amounts are fully vested at all times. We may also make discretionary contributions to participants' accounts, which vest in equal installments over six years, subject to acceleration upon a change of control. Participants may elect to invest the amounts in the plan in various established funds.
Perquisites and other benefits
We maintain, and the named executive officers participate in, a 401(k) retirement savings plan. Each participant who is a United States employee may contribute to the 401(k) plan, through payroll deductions, up to 80% of his or her salary limited to the maximum allowed by the Internal Revenue Service
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regulations. All amounts contributed by employee participants and earnings on these contributions are fully vested at all times and are not taxable to participants until withdrawn. Employee participants may elect to invest their contributions in various established funds. We may also make contributions to the accounts of plan participants.
Our compensation program does not include any other material benefits or perquisites for our named executive officers. Except as set forth above, our named executive officers generally participate in the same programs as our other employees.
Employment agreements
The following is a description of the terms of the employment agreements with each of our named executive officers.
William A. "Kip" Tindell, III
We entered into an amended and restated employment agreement, effective as of August 15, 2012, with Mr. Tindell, which amended and restated Mr. Tindell's prior employment agreement with us. The agreement provides for a five-year initial term followed by successive one-year terms, unless either party provides the other with notice that it does not elect to extend the term at least 90 days prior to the expiration of the then-current term.
The agreement provides for Mr. Tindell's position as our Chief Executive Officer. It provides that, during the five-year period immediately following the expiration of the term, we will use our best efforts to cause Mr. Tindell to be nominated and elected as Chairman of our board of directors unless there is cause to remove him from our board of directors, and that Mr. Tindell will agree to serve as Chairman of our board of directors.
Under the amended 2012 agreement, Mr. Tindell's annual base salary is $675,000. Mr. Tindell's annual salary is subject to annual review by our board of directors. The agreement also provides that Mr. Tindell will receive an annual cash bonus based upon financial and non-financial performance targets established by our board of directors. The agreement provides that, with respect to each fiscal year that ends during the term, commencing with fiscal 2012, Mr. Tindell's target total compensation (i.e., annual base salary plus target annual bonus) will be no less than Mr. Tindell's target compensation for the immediately preceding year. The agreement also provides for Mr. Tindell's participation in our health and welfare benefit plans applicable to senior executives.
Mr. Tindell's employment agreement provides certain severance benefits upon termination by us without cause or by Mr. Tindell for good reason. Cause is generally defined as (a) a material breach by Mr. Tindell of any material provision of his agreement that is not corrected by him within 30 days after receipt of written notice from us specifying such breach, to the extent such breach is capable of cure, (b) Mr. Tindell's conviction of, or entry by him of a guilty or nolo contendere plea to, the commission of a felony or a crime involving moral turpitude, other than vicarious liability or traffic violations, (c) Mr. Tindell's intentional breach of company policies constituting theft or embezzlement from us or any of our customers or suppliers; or (d) Mr. Tindell's gross neglect or intentional misconduct in connection with the performance of any material portion of Mr. Tindell's duties (which, in the case of Mr. Tindell's gross neglect, is not corrected by Mr. Tindell within 30 days after receipt of written notice from us specifying such neglect, to the extent that such neglect is capable of cure). Good reason is generally defined as (i) an adverse change in Mr. Tindell's title or reporting line or material duties, authorities or responsibilities, (ii) the assignment to Mr. Tindell of duties materially inconsistent with his position, (iii) a material breach by us of any material provision of his employment agreement, (iv) a reduction of his
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annual base salary or benefits or annual bonus opportunity (other than such a reduction that is generally consistent with a general reduction affecting other of our similarly situated executives), (v) failure by us to pay any portion of his annual base salary or bonus, (vi) our requiring him to be headquartered at any office or location more than 50 miles from Coppell, Texas, or (vii) the termination of the employment of either of the other named executive officers, Ms. Tindell or Ms. Reiff, by us without cause or by such executive for good reason, in each case subject to applicable notice and cure provisions. In addition, a termination of employment for any reason during the 30-day period immediately following the six-month anniversary of the occurrence of a change in control (as defined in the agreement) will be deemed a termination for good reason.
If Mr. Tindell's employment is terminated by us without cause or by Mr. Tindell for good reason, other than on account of the employment of one of the other named executive officers terminating, he will receive (a) two times his annual base salary, payable in equal installments over two years on our regular payroll schedule, (b) two times the greater of (i) the annual bonus earned by him for the previous fiscal year and (ii) a prorated amount of the bonus he would have earned for the year of termination had he remained employed throughout the year based on actual performance, (c) continuation of medical and welfare benefits for two years following the termination date, paid for by us, and (d) accelerated vesting of all unvested stock options.
In addition, if Mr. Tindell resigns from his employment due to the termination of the employment of either of the other named executive officers by us without cause or by such executive for good reason, or, on or after August 15, 2016, Mr. Tindell resigns without good reason, then Mr. Tindell will receive (a) one year's annual base salary, payable in equal installments over one year on our regular payroll schedule, (b) an amount equal to the annual bonus he would have earned for the year of termination had he remained employed throughout the year, based on actual performance, (c) an additional prorated amount of such annual bonus, based on the amount of time actually employed in such year, (d) continuation of medical and welfare benefits for one year following the termination date, paid for by us, and (e) accelerated vesting of all unvested stock options.
The employment agreement also provides for certain severance benefits upon death and disability. There are two different types of disability for this purpose. Type I disability means Mr. Tindell's incapacity to perform the essential duties of his position for any six months during any 12-month period due to Mr. Tindell's physical or mental illness. Type II disability means Mr. Tindell's substantial incapacity to perform the essential duties of his position for any three months during any 12-month period due to Mr. Tindell's physical or mental illness. Upon death, all of Mr. Tindell's unvested stock options will immediately vest and we will pay Mr. Tindell's estate a prorated annual bonus based on actual performance. Upon termination for either type of disability, Mr. Tindell will receive the same severance benefits as upon a termination by us without cause or by him for good reason, except that, in the case of a Type II disability, the salary and bonus multiplier will be 1.5 instead of two and the salary will be payable over 18 months instead of two years.
Any severance payment payable to Mr. Tindell pursuant to his employment agreement will be subject to the named executive officer's execution of a release of claims in favor of us.
Mr. Tindell has agreed that, during his employment with us and during the two-year period following the termination date, he will not directly or indirectly work for or engage or invest in any of our competitors or solicit, directly or through any third party, any of our employees or consultants.
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Sharon Tindell and Melissa Reiff
Both Ms. Tindell and Ms. Reiff entered into amended and restated employment agreements, effective as of August 15, 2012, which amended and restated their prior employment agreements with us. Under the amended 2012 agreements, Ms. Tindell serves as the Chief Merchandising Officer and Ms. Reiff serves as our President and Chief Operating Officer, and both Ms. Tindell's and Ms. Reiff's annual base salaries are $550,000. Their annual salaries are subject to annual review by our board of directors.
Other than annual base salary and position, all other terms of the employment agreements for Ms. Tindell and Ms. Reiff are identical to those of Mr. Tindell's employment agreement.
Post-IPO 2013 Equity Plan and Executive Bonus Plan
We intend to adopt the 2013 Equity Plan (as defined below) and the Executive Bonus Plan (as defined below) in connection with this offering. For a description of these new compensation plans, see "Equity Incentive Plans" and "Executive Bonus Plan" below. The purpose of these new plans will be to allow us to pay annual bonuses (including annual discretionary and performance-based bonuses) to our named executive officers and other senior executives and to make various equity-based compensation awards to our named executive officers and other employees, consultants and directors in a manner that is appropriate for a public company and that is intended to allow us to make awards that are not subject to the federal income tax deduction limitation set forth in Section 162(m) of the Code (as defined in "Material U.S. Federal Income Tax Consequences to Non-U.S. Holders").
Outstanding equity awards at fiscal year-end
The table below sets forth certain information regarding the outstanding equity awards held by our named executive officers as of March 2, 2013.
Name |
Grant date |
Number of securities underlying unexercised options (#) exercisable(1) |
Number of securities underlying unexercised options (#) unexercisable(1) |
Option exercise price ($) |
Option expiration date |
|||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
William A. "Kip" Tindell, III |
| | | $ | | | ||||||
Sharon Tindell |
| | | $ | | | ||||||
Melissa Reiff |
6/20/2012 | | 6,415 | $ | 100 | 6/20/2022 | ||||||
(1) Time-based stock options granted on June 22, 2012 under the 2012 Stock Option Plan vest pro rata as follows: 20% on June 20, 2013, 20% on June 20, 2014, 20% on June 20, 2015, 20% on June 20, 2016, and the remaining 20% on June 20, 2017.
Equity incentive plans
2012 Stock Option Plan
We maintain the 2012 Stock Option Plan, as described above. We expect that, on and after the closing of this offering and following the effectiveness of the 2013 Equity Plan (as described below), no further grants will be made under the 2012 Stock Option Plan but existing awards will remain outstanding.
2013 Equity Plan
Prior to the closing of the offering, we intend to adopt our 2013 Incentive Award Plan (the "2013 Equity Plan"). The principal purpose of the 2013 Equity Plan will be to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and
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cash-based performance bonus awards. The 2013 Equity Plan will also be designed to permit us to make equity-based awards and cash-based awards intended to qualify as "performance-based compensation" under Section 162(m) of the Code. The principal anticipated features of the 2013 Equity Plan are summarized below, but remain subject to further change in our discretion.
Share reserve
Under the 2013 Equity Plan, shares of our common stock will initially be reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, or SARs (as defined below), restricted stock awards, restricted stock unit awards, deferred stock awards, deferred stock unit awards, dividend equivalent awards, stock payment awards and performance awards and other stock-based awards. The maximum number of shares of our common stock that may be subject to one or more awards granted to any one participant during any calendar year will be and the maximum aggregate amount that may be paid in cash to any one person in any calendar year with respect to one or more awards payable in cash will be $ . Further, the maximum aggregate grant date fair value of awards granted to a non-employee director during any calendar year shall be $ .
The following counting provisions will be in effect for the share reserve under the 2013 Equity Plan:
Administration
The compensation committee of our board of directors (or another committee or a subcommittee of our board of directors) will administer the 2013 Equity Plan. Except as otherwise determined by our board of directors, the compensation committee will consist of at least two members of our board of directors, each of whom will be intended to qualify as an "outside director," within the meaning of Section 162(m) of the Code, and a "non-employee director" for purposes of Rule 16b-3 under the Exchange Act and, to the extent required by applicable law, an "independent director" under the rules of the New York Stock Exchange or other principal securities market on which shares of our common stock are traded. The 2013 Equity Plan
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will provide that the compensation committee may from time to time delegate its authority to grant awards to a committee consisting of one or more members of our board of directors or one or more of our officers, provided that no officer shall be delegated such authority to grant awards to individuals who are subject to Section 16 of the Exchange Act, covered employees within the meaning of Section 162(m) of the Code, or officers or directors who have been delegated the authority to grant or amend awards under the 2013 Equity Plan.
Subject to the terms and conditions of the 2013 Equity Plan, the administrator will have the authority to select the persons to whom awards are to be made, to determine the type of awards to be granted and the number of shares to be subject to awards and the terms and conditions of awards, to determine when awards can be settled in cash, shares or other awards or whether to cancel, forfeit or surrender awards, to prescribe the form of award agreement, to accelerate vesting or lapse restrictions and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2013 Equity Plan. The administrator will also be authorized to adopt, amend or rescind rules relating to administration of the 2013 Equity Plan. Our full board of directors will administer the 2013 Equity Plan with respect to awards to non-employee directors.
Eligibility
The 2013 Equity Plan will provide that options, SARs, restricted stock and all other stock-based and cash-based awards may be granted to individuals who will then be our officers, employees or consultants or the officers, employees or consultants of certain of our affiliates. The 2013 Equity Plan will further provide that such awards may also be granted to our directors, but that only employees of our company or certain of our subsidiaries may be granted incentive stock options ("ISOs").
Awards
The 2013 Equity Plan will provide that the administrator may grant or issue stock options, SARs, restricted stock, restricted stock units, deferred stock, deferred stock units, dividend equivalents, performance awards, stock payments and other stock-based and cash-based awards, or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.
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Change in control
In the event of a change in control, each outstanding award (other than awards subject to performance-based vesting) under the 2013 Equity Plan shall continue in effect or be assumed (as such concept is defined in the 2013 Equity Plan) or an equivalent award substituted by a successor corporation or a parent or subsidiary of a successor corporation and each outstanding award subject to performance-based vesting shall be subject to the terms of the applicable award agreement or the administrator's discretion. In the event that the acquirer does not assume or replace granted awards (other than awards subject to performance-based vesting) prior to the consummation of such transaction, causing such awards to terminate under the 2013 Equity Plan upon consummation of the transaction, the administrator may cause any or all of such awards issued under the 2013 Equity Plan to be subject to accelerated vesting such that 100% of such awards will become vested and exercisable (for a period of 15 days from the date the administrator notifies the recipient that the award is fully exercisable) upon the consummation of such change in control and all forfeiture restrictions on any or all of such awards shall lapse. In addition, in the event such awards are assumed or substituted with equivalent awards but the individual's service is subsequently terminated by the successor without cause within a 12 month period following the change in control event, such continued, assumed or substituted awards will become fully vested on an accelerated basis. The 2013 Equity Plan will also provide that the administrator may make appropriate adjustments to awards under the 2013 Equity Plan and will be authorized to provide for the acceleration, cash-out, termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions. Under the 2013 Equity Plan, we anticipate that a change in control will generally be defined as:
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Adjustments of awards
In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, distribution of our assets to stockholders (other than normal cash dividends) or any other corporate event affecting the number of outstanding shares of our common stock or the share price of our common stock other than an equity restructuring that would require adjustments to the 2013 Equity Plan or any awards under the 2013 Equity Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the 2013 Equity Plan will provide that the administrator may make equitable adjustments, if any, to reflect such change with respect to:
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Amendment and termination
The 2013 Equity Plan will provide that our board of directors or the compensation committee, as applicable, may terminate, amend or modify the 2013 Equity Plan at any time and from time to time. However, the 2013 Equity Plan will generally require us to obtain stockholder approval:
Expiration date
The 2013 Equity Plan will expire on, and no option or other award will be granted pursuant to the 2013 Equity Plan after, the tenth anniversary of the effective date of the 2013 Equity Plan. Any award that will be outstanding on the expiration date of the 2013 Equity Plan will remain in force according to the terms of the 2013 Equity Plan and the applicable award agreement.
Securities laws and U.S. federal income taxes
The 2013 Equity Plan will be designed to comply with various securities and U.S. federal tax laws as follows:
Securities laws. The 2013 Equity Plan will be designed to conform to all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the SEC thereunder, including without limitation, Rule 16b-3. The 2013 Equity Plan will be administered, and options and other equity awards will be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations.
Section 409A of the Code. The 2013 Equity Plan and awards granted thereunder will generally be designed to comply with or be exempt from the requirements of Section 409A of the Code and, to the extent that awards under the 2013 Equity Plan will be considered "nonqualified deferred compensation" for purposes of Section 409A of the Code and will be subject to the additional requirements regarding the payment of deferred compensation imposed by Section 409A of the Code, such awards will generally be intended to comply with Section 409A of the Code.
Section 162(m) of the Code. The 2013 Equity Plan will be designed to provide for awards that are exempt from the requirements of Section 162(m) of the Code, which generally provides that income tax deductions of publicly held corporations may be limited to the extent total compensation (including, but not limited to, base salary, annual bonus and income attributable to stock option exercises and other non-qualified benefits) for certain executive officers exceeds $1,000,000 (less the amount of any "excess parachute payments" as defined in Section 280G of the Code) in any taxable year of the corporation, but provides that the deduction limit will not apply to certain "performance-based compensation" established by an independent compensation committee that is adequately disclosed to and approved by stockholders. In particular, stock options and SARs will satisfy the "performance-based compensation" exception if the awards are made by a qualifying compensation committee, the 2013 Equity Plan sets the maximum number of shares that can be granted to any person within a specified period and the compensation is based solely on an increase in the stock price after the grant date. Specifically, the option exercise price must be equal to or greater than the fair market value of the stock subject to the award on the grant date. Under a Section 162(m) transition rule for compensation plans of corporations that are privately held and that
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subsequently become publicly held as a result of an initial public offering, the 2013 Equity Plan will not be subject to Section 162(m) until a specified transition date, which is the earliest of:
After the transition date, rights or awards granted under the 2013 Equity Plan, other than options and SARs, will not qualify as "performance-based compensation" for purposes of Section 162(m) unless such rights or awards are granted or vest upon pre-established objective performance goals, the material terms of which have been disclosed to and approved by our stockholders.
We intend to file a registration statement on Form S-8 under the Securities Act to register the total number of shares of our common stock that may be issued under our 2013 Equity Plan. That registration statement will become effective upon filing, and shares of our common stock covered by such registration statement will be eligible for sale in the public market immediately after the effective date of such registration statement, subject to Rule 144 volume limitations applicable to affiliates, vesting restrictions and the lock-up agreements described under "Underwriting."
Equity compensation plan information
The number of shares underlying outstanding stock options, the weighted-average exercise price of such outstanding options and the number of additional shares remaining available for future issuance under our equity plans, as of March 2, 2013, are as follows:
Plan |
Number of securities to be issued upon exercise of outstanding options, warrants and rights(a) |
Weighted-average exercise price of outstanding options, warrants and rights(b) |
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))(c) |
|||
---|---|---|---|---|---|---|
Equity compensation plans approved by the security holders 2012 Stock Option Plan |
41,135 | $100.00 | 20,707 | |||
Equity compensation plans not approved by security holders |
| | | |||
Total |
41,135 | 20,707 | ||||
Executive Bonus Plan
Prior to the closing of this offering, we intend to adopt, and have our stockholders approve, a Senior Executive Incentive Bonus Plan (the "Executive Bonus Plan"). The Executive Bonus Plan is designed to provide an incentive for superior work and to motivate covered key executives toward even greater achievement and business results, to tie their goals and interests to those of us and our stockholders and
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to enable us to attract and retain highly qualified executives. The principal anticipated features of the Executive Bonus Plan are summarized below.
The Executive Bonus Plan is an incentive bonus plan under which certain key executives, including our named executive officers, will be eligible to receive bonus payments with respect to a specified period (for example, our fiscal year). Bonuses will generally be payable under the Executive Bonus Plan upon the attainment of pre-established performance goals. Notwithstanding the foregoing, we may pay bonuses (including, without limitation, discretionary bonuses) to participants under the Executive Bonus Plan based upon such other terms and conditions as the compensation committee may in its discretion determine.
We anticipate that the performance goals under the Executive Bonus Plan will relate to one or more financial, operational or other metrics with respect to individual or company performance with respect to us or any of our subsidiaries, including but not limited to the following possible performance goals: net earnings or losses (either before or after one or more of the following: interest, taxes, depreciation and amortization) (including EBITDA and Adjusted EBITDA); gross or net sales or revenue; revenue growth or product revenue growth; net income (either before or after taxes); adjusted net income; operating income (either before or after taxes); operating earnings or profit; pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); cash flow (including, but not limited to, operating cash flow and free cash flow); return on assets or net assets; return on capital; return on stockholders' equity; total stockholder return; return on sales; gross or net profit or operating margin; costs or reduction in costs; funds from operations; expenses; working capital; earnings or loss per share; adjusted earnings per share; price per share of common stock; appreciation in and/or maintenance of the price of our common stock or any other publicly-traded securities; economic value-added models or equivalent metrics; comparisons with various stock market indices; regulatory achievements and compliance; implementation or completion of critical projects; market share; customer satisfaction; customer growth; employee satisfaction; recruiting and maintaining personnel; strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property; and establishing relationships with commercial entities with respect to the marketing, distribution and sale of our products); supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of our products); co-development, co-marketing, profit sharing, joint venture or other similar arrangements; financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of our equity or debt securities; factoring transactions; sales or licenses of our assets, including our intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures; and economic value, any of which may be measured either in absolute terms or as compared to any incremental increase or decrease in the results of a peer group or market performance indicators or indices.
The Executive Bonus Plan will be administered by the compensation committee. The compensation committee will select the participants in the Executive Bonus Plan and any performance goals to be utilized with respect to the participants, establish the bonus formulas for each participant's annual bonus, and certify whether any applicable performance goals have been met with respect to a given performance period. The Executive Bonus Plan will provide that we may amend or terminate the Executive Bonus Plan at any time in our sole discretion. Any amendments to the Executive Bonus Plan will require stockholder
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approval only to the extent required by applicable law, rule or regulation. The Executive Bonus Plan will expire on the earlier of:
Rule 10b5-1 sales plan
Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional shares outside a Rule 10b5-1 plan when they are not in possession of material nonpublic information subject to compliance with the terms of our policy on insider trading and communications with the public.
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Certain relationships and related party transactions
Exchange Agreement
As required by our existing stockholders agreement, each holder of our preferred stock, which includes, among others, LGP, Kip Tindell, Sharon Tindell and Melissa Reiff, will enter into an agreement, which we refer to as the "Exchange Agreement." Pursuant to the Exchange Agreement, immediately following the payment of the Dividend with the proceeds of this offering, the holders thereof will exchange each outstanding share of preferred stock for a number of shares of common stock determined by dividing the liquidation preference amount of such preferred stock, after giving effect to the reduction resulting from the Dividend, by the initial public offering price of a share of our common stock in this offering, net of the underwriting discount and a pro rata portion, based upon the number of shares being sold in this offering, of the estimated offering-related expenses incurred by us. For more information, see "The Exchange."
Management services agreement
In connection with LGP's acquisition of The Container Store, Inc. in 2007, The Container Store, Inc. entered into a management services agreement with LGP, which was amended and restated in 2011, pursuant to which LGP agreed to provide management, consulting and financial planning services on an ongoing basis to The Container Store, Inc. and certain of The Container Store, Inc.'s subsidiaries. The management services agreement provides for the payment to LGP of a $1,000,000 annual fee and reimbursement of reasonable out-of-pocket expenses. The management services agreement has a ten-year term (subject to automatic extension), and will terminate automatically upon the closing of this offering, subject to the survival of certain obligations.
Stockholders agreement
In connection with our acquisition by LGP acquisition of The Container Store, Inc. in 2007, we, certain affiliates of LGP, and all other holders of our common stock and preferred stock, entered into a stockholders agreement. Upon the closing of the offering we will amend and restate our stockholders agreement to eliminate all provisions thereof other than those related to the registration rights, which are described below.
Demand registration rights
At any time beginning six months after this offering, subject to certain restrictions,
These demand registration rights are subject to certain exceptions set forth in the stockholders agreement.
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Piggyback registration rights
If we propose to register any of our own securities under the Securities Act in a public offering other than an initial public offering, we will be required to provide notice to all holders of our common stock with registration rights under our stockholders agreement relating to the registration and provide them with the right to include their shares in the registration statement. These piggy-back registration rights are subject to certain exceptions set forth in the stockholders agreement.
Expenses of registration
We will be required to bear the registration expenses, other than underwriting discounts and commissions and transfer taxes, associated with any registration of shares of our common stock held by the holders of our common stock with registration rights under our stockholders agreement.
Loans to certain directors and executive officers
None.
Employment agreements
We have entered into employment agreements with our named executive officers. For more information regarding these agreements, see "Executive CompensationEmployment and Other Agreements."
Indemnification agreements
Our bylaws, as will be in effect prior to the closing of this offering, provide that we will indemnify our directors and officers to the fullest extent permitted by the Delaware General Corporation Law, subject to certain exceptions contained in our bylaws. In addition, our certificate of incorporation, as will be in effect prior to the closing of this offering, will provide that our directors will not be liable for monetary damages for breach of fiduciary duty.
Prior to the closing of this offering, we will enter into indemnification agreements with each of our executive officers and directors. The indemnification agreements will provide the executive officers and directors with contractual rights to indemnification, and expense advancement and reimbursement, to the fullest extent permitted under the Delaware General Corporation Law, subject to certain exceptions contained in those agreements.
We have also agreed to indemnify Kip Tindell to the fullest extent permitted by our articles of incorporation and bylaws in connection with a book he has agreed to write detailing, among other things, history, the principles upon which we were founded and the impact of "Conscious Capitalism."
There is no pending litigation or proceeding naming any of our directors or officers to which indemnification is being sought, and we are not aware of any pending litigation that may result in claims for indemnification by any director or officer.
Directed share program
The underwriters have reserved for sale, at the initial public offering price, up to approximately shares of our common stock being offered for sale to our directors, officers, and certain employees and other parties related to the Company as part of a directed share program. The directed share program will not limit the ability of our directors, officers and their family members, or holders of more than 5% of our capital stock, to purchase more than $120,000 in value of our common stock. We do
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not currently know the extent to which these related persons will participate in our directed share program, if at all, or the extent to which they will purchase more than $120,000 in value of our common stock.
Our policy regarding related party transactions
Our board of directors recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof). Prior to the closing of this offering, our board of directors will adopt a written policy on transactions with related persons that is in conformity with the requirements for issuers having publicly-held common stock that is listed on the New York Stock Exchange. Under the new policy:
In connection with the review and approval or ratification of a related person transaction:
In addition, the related person transaction policy provides that the committee or disinterested directors, as applicable, in connection with any approval or ratification of a related person transaction involving a non-employee director or director nominee, should consider whether such transaction would compromise the director or director nominee's status as an "independent," "outside," or "non-employee" director, as applicable, under the rules and regulations of the SEC, the New York Stock Exchange and the Code.
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The following table sets forth information, as of July 1, 2013 regarding the beneficial ownership of our common stock immediately prior to the Exchange and after giving effect to the Exchange (and following the payment of the Dividend to Holders of our senior preferred stock) and this offering, by:
Each stockholder's percentage ownership before the Exchange is based on 202,196 shares of our senior preferred stock, 202,196 shares of our junior preferred stock, and 198,169 shares of our common stock, respectively, outstanding as of July 1, 2013. Each stockholder's percentage ownership after this offering is based on shares of our common stock outstanding immediately after the completion of this offering, after giving effect to the Exchange. See "The Exchange."
The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of July 1, 2013 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the address of all listed stockholders is c/o The Container Store Group, Inc., 500 Freeport Parkway, Coppell, TX 75019. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
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|
Shares of senior preferred stock beneficially owned prior to the exchange |
Shares of junior preferred stock beneficially owned prior to the exchange |
Shares of common stock beneficially owned prior to the exchange |
Shares of common stock beneficially owned after the offering |
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Name of beneficial owner |
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Number |
Percentage |
Number |
Percentage |
Number |
Percentage |
Number |
Percentage |
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5% Stockholders |
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Green Equity Investors V, L.P. Green Equity Investors Side V, L.P. and TCS Co-Invest, LLC(1) |
169,911 | 84.0% | 169,911 | 84.0% | 301,777 | 59.6% | % | ||||||||||||||||||
Named Executive Officers and Directors |
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William A. "Kip" Tindell, III |
7,253 | 3.6% | 7,253 | 3.6% | 61,281 | 12.1% | % | ||||||||||||||||||
Sharon Tindell |
7,444 | 3.7% | 7,444 | 3.7% | 62,895 | 12.4% | % | ||||||||||||||||||
Melissa Reiff |
1,125 | * | 1,125 | * | 10,771 | 2.1% | % | ||||||||||||||||||
Jodi Taylor |
70 | * | 70 | * | 1,224 | * | % | ||||||||||||||||||
Per von Mentzer |
35 | * | 35 | * | 700 | * | % | ||||||||||||||||||
Jonathan D. Sokoloff(1) |
169,911 | 84.0% | 169,911 | 84.0% | 301,777 | 59.6% | % | ||||||||||||||||||
Timothy J. Flynn(1) |
169,911 | 84.0% | 169,911 | 84.0% | 301,777 | 59.6% | % | ||||||||||||||||||
J. Kristofer Galashan(1) |
169,911 | 84.0% | 169,911 | 84.0% | 301,777 | 59.6% | % | ||||||||||||||||||
All executive officers and directors as a group (nine persons) |
185,912 | 91.9% | 185,912 | 91.9% | 436,991 | 81.3% | % | ||||||||||||||||||
* Represents beneficial ownership of less than 1%.
(1) Voting and investment power with respect to the shares of our common stock held by Green Equity Investors V, L.P. and Green Equity Investors Side V, L.P. (collectively, the "Green Funds") and TCS Co-Invest, LLC ("TCS Co") may be deemed to be shared by certain affiliated entities. GEI Capital V, LLC ("GEIC"), is the general partner of the Green Funds. Green V Holdings, LLC ("Holdings") is a limited partner of the Green Funds. LGP is the management company of the Green Funds, the Manager of TCS Co and an affiliate of GEIC and Holdings. LGP Management, Inc. ("LGPM") is the general partner of LGP. Each of the Green Funds, Holdings, LGP, LGPM and TCS Co disclaims such shared beneficial ownership of our common stock, except to the extent of its pecuniary interest therein. Each of Jonathan D. Sokoloff, Timothy J. Flynn and J. Kristofer Galashan may also be deemed to share voting and investment power with respect to such shares due to their respective positions with LGPM, and each of them disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. Each of Messrs. John G. Danhakl, Peter J. Nolan, Jonathan D. Sokoloff, Jonathan A. Seiffer, John M. Baumer, Timothy J. Flynn, James D. Halper, Todd M. Purdy, Michael S. Solomon, and W. Christian McCollum either directly (whether through ownership interest or position) or indirectly through one or more intermediaries, may be deemed to control LGP. As such, Messrs. Danhakl, Nolan, Sokoloff, Seiffer, Baumer, Flynn, Halper, Purdy, Solomon, and McCollum may be deemed to have shared voting and investment power with respect to all shares beneficially owned by TCS Co. These individuals each disclaim beneficial ownership of the securities held by TCS Co except to the extent of his pecuniary interest therein. Each of the foregoing individual's address is c/o Leonard Green & Partners, L.P., 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, California 90025.
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General
Upon the closing of this offering, our authorized capital stock will consist of shares of common stock, par value $0.01 per share, and shares of preferred stock, par value $0.01 per share. The following description of our capital stock and provisions of our certificate of incorporation and by-laws are summaries and are qualified by reference to the certificate of incorporation and by-laws that will become effective upon the closing of this offering. We urge you to read our certificate of incorporation and our by-laws. Copies of these documents have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The description of our common stock reflects changes to our capital structure that will occur upon the closing of this offering.
Common stock
Upon the closing of this offering, the total number of our authorized shares of common stock will be shares. As of July 1, 2013, before giving effect to the Exchange, we had outstanding 202,196 shares of our senior preferred stock, 202,196 shares of our junior preferred stock and 498,169 shares of our common stock. See "The Exchange." As of July 1, 2013, we had 142 stockholders of record of our senior preferred stock, 142 stockholders of record of our junior preferred stock and 143 stockholders of record of our common stock and, had outstanding options to purchase 41,135 shares of common stock, which options were exercisable at a weighted average exercise price of $100.00 per share. In connection with the Exchange, all of our senior preferred stock and junior preferred stock will be exchanged for shares of common stock.
After giving effect to this offering and the Exchange, we will have shares of common stock outstanding and outstanding options to purchase shares of common stock, which options will be exercisable at a weighted average exercise price of $ per share.
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of any series of preferred stock that we may designate and issue in the future.
In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately our net assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. Our outstanding shares of common stock are, and the shares offered by us in this offering will be, when issued and paid for, validly issued, fully paid and nonassessable. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
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Preferred stock
Upon the closing of this offering, the total of our authorized shares of preferred stock will be shares. Upon the closing of this offering, we will have no shares of preferred stock outstanding.
Under the terms of our certificate of incorporation that will become effective upon the closing of this offering, our board of directors is authorized to direct us to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.
The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. We have no present plans to issue any shares of preferred stock.
Authorized but unissued shares
The authorized but unissued shares of our common stock and our preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the listing standards of the New York Stock Exchange. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Registration rights
Upon the closing of this offering, the holders of shares of our common stock or their transferees will be entitled to various rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. Shares covered by a registration statement will be eligible for sale in the public market upon the expiration or release from the terms of the lock-up agreement. See "Certain Relationships and Related Party TransactionsStockholders Agreement" elsewhere in this prospectus.
Exclusive venue
Our certificate of incorporation, as it will be in effect upon the closing of this offering, will require, to the fullest extent permitted by law, that (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our certificate of incorporation or the bylaws or (iv) any action asserting a claim against us governed by the internal affairs doctrine will have to be brought only in the Court of Chancery in the State of Delaware. Although we believe this provision benefits us by providing increased consistency
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in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
Anti-takeover effects of provisions of our certificate of incorporation, our by-laws and Delaware law
Our certificate of incorporation and bylaws, as they will be in effect upon completion of this offering, also contain provisions that may delay, defer or discourage another party from acquiring control of us. We expect that these provisions, which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give our board of directors the power to discourage acquisitions that some stockholders may favor.
Classified board of directors
Our certificate of incorporation will provide that our board of directors will be divided into three classes, with the classes as nearly equal in number as possible and each class serving three-year staggered terms. In addition, our certificate of incorporation will provide that directors may only be removed from our board of directors with cause. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers, or changes in control of us or our management.
Requirements for advance notification of stockholder meetings, nominations and proposals
Our certificate of incorporation will provide that, upon completion of this offering, special meetings of the stockholders may be called only by a resolution adopted by the affirmative vote of the majority of the directors then in office. Our bylaws will prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. In addition, any stockholder who wishes to bring business before an annual meeting or nominate directors must comply with the advance notice requirements set forth in our bylaws. These provisions may have the effect of deferring, delaying or discouraging hostile takeovers or changes in control of us or our management.
Stockholder action by written consent
Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless our amended and restated certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation will preclude stockholder action by written consent.
Authorized but unissued shares
The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the listing standards of the New York Stock Exchange. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
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In addition, we are subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents a publicly held Delaware corporation from engaging in a "business combination" with any "interested stockholder" for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner. A "business combination" includes, among other things, a merger or consolidation involving us and the "interested stockholder" and the sale of more than 10% of our assets. In general, an "interested stockholder" is any entity or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person.
Transfer agent and registrar
The transfer agent and registrar for our common stock will be American Stock Transfer & Trust Company, LLC.
The New York Stock Exchange
We will apply to have our common stock listed on the New York Stock Exchange under the symbol " ."
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The following is a summary of the material terms of our material indebtedness. This summary is qualified in its entirety by reference to the related agreements which are filed as exhibits to the registration statement, of which this prospectus forms a part.
The Container Store, Inc.
Senior Secured Term Loan Facility
On April 6, 2012, The Container Store, Inc. entered into a $275.0 million senior secured term loan facility with JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, and Barclays Bank PLC, Morgan Stanley Senior Funding, Inc., and Wells Fargo Bank, N.A., as Co-Documentation Agent. On April 8, 2013, The Container Store, Inc. entered into an amendment to the senior secured term loan that increased the principal thereof from $275.0 million to $362.3 million, which, as amended, we refer to as the "Senior Secured Term Loan Facility." The proceeds of the additional term loans, together with cash on hand, was applied to make a distribution from The Container Store, Inc. to us, its sole stockholder, on April 8, 2013. We then immediately declared a $90.0 million cash dividend to holders of our senior preferred stock which was paid on April 9, 2013.
The Senior Secured Term Loan Facility accrues interest at the rate of LIBOR + 4.25%, subject to a LIBOR floor of 1.25%, and matures on April 6, 2019. The Container Store, Inc. is required to make quarterly principal payments in the amount of $0.9 million prior to the maturity date of the Senior Secured Term Loan Facility.
The Senior Secured Term Loan Facility is secured by (a) a first-priority security interest in substantially all of our assets (excluding stock in foreign subsidiaries in excess of 65% and assets of non-guarantors and subject to certain other exceptions) (other than the collateral that secures the Revolving Credit Facility on a first-priority basis) and (b) a second-priority security interest in the assets securing the Revolving Credit Facility on a first-priority basis, as described below. Obligations under the Senior Secured Term Loan Facility are guaranteed by each of The Container Store Group, Inc. and our U.S. subsidiaries. The Secured Term Loan Facility contains a number of covenants that, among other things, restrict our ability, subject to specified exceptions, to incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve, engage in businesses that are not in a related line of business; make loans, advances or guarantees; engage in transactions with affiliates; and make investments. In addition, the credit agreement contains certain cross-default provisions. As of June 1, 2013, we are in compliance with all covenants and no event of default (as such term is defined in the Senior Secured Term Loan Facility) had occurred.
Events of default under the Senior Secured Term Loan Facility include, but are not limited to: (i) nonpayment of principal, interest, fees or other amounts; (ii) failure to perform or observe covenants; (iii) certain cross-defaults to other indebtedness; (iv) bankruptcy or insolvency of borrowers, guarantors or subsidiaries; (v) inability of the borrowers, guarantors, or their material subsidiaries to pay debts; (vi) certain monetary judgments against borrowers, guarantors or their material subsidiaries and material non-monetary judgments; (vii) failure of subordination, in each case, subject to certain exceptions and qualifications; and (viii) and any change of control occurrence.
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Revolving Credit Facility
On April 6, 2012, The Container Store, Inc. entered into a $75.0 million senior secured asset-based revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and Wells Fargo Bank, N.A., as syndication agent, which we refer to as the "Revolving Credit Facility." Borrowings under the Revolving Credit Facility accrue interest at LIBOR + 1.25% to 1.75%, subject to a grid based on average daily excess availability over the preceding quarter, and the maturity date is April 6, 2017.
The Revolving Credit Facility is available for working capital and other general corporate purposes. The Revolving Credit Facility permits swingline advances to The Container Store, Inc. of up to $7.5 million and the issuance of letters of credit upon our request of up to $20.0 million. The availability of credit at any given time under the Revolving Credit Facility is limited by reference to a borrowing base formula based upon numerous factors, including the value of eligible inventory, eligible accounts receivable, and reserves established by the administrative agent. As a result of the borrowing base formula, the actual borrowing availability under the line of credit could be less than the stated amount of the line of credit (as reduced by the actual borrowings and outstanding letters of credit under the line of credit). As of June 1, 2013 there was $5.0 million of outstanding borrowings under the Revolving Credit Facility, and there was $54.4 million of availability thereunder.
The Revolving Credit Facility is secured by (a) a first-priority security interest in all of our personal property (excluding stock in foreign subsidiaries in excess of 65% and assets of non-guarantors and subject to certain other exceptions), consisting of inventory, accounts receivable, cash, deposit accounts, and other general intangibles, and (b) a second-priority security interest in the collateral that secures the Senior Secured Term Loan Facility on a first-priority basis, as described above. Obligations under the Revolving Credit Facility are guaranteed by each of The Container Store Group, Inc. and The Container Store Group, Inc.'s U.S. subsidiaries.
The Revolving Credit Facility contains a number of covenants that, among other things, restrict our ability, subject to specified exceptions, to incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve itself, engage in businesses that are not in a related line of business; make loans, advances or guarantees; engage in transactions with affiliates; and make investments. In addition, the Revolving Credit Facility contains certain cross-default provisions. We are required to maintain a consolidated fixed-charge coverage ratio of 1.0 to 1.0 if excess availability is less than $10 million at any time. As of June 1, 2013, we were in compliance with all covenants and no event of default (as such term is defined in the Revolving Credit Facility) had occurred.
Events of default under the Revolving Credit Facility include, but are not limited to: (i) nonpayment of principal, interest, fees or other amounts; (ii) failure to perform or observe covenants; (iii) certain cross-defaults to indebtedness; (iv) bankruptcy or insolvency of borrowers, guarantors or subsidiaries; (v) inability of the borrowers, guarantors, or their material subsidiaries to pay debts; (vi) certain monetary judgments against borrowers, guarantors or their material subsidiaries and material non-monetary judgments; (vii) failure of subordination, in each case, subject to certain exceptions and qualifications; and (viii) and any change of control occurrence.
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Elfa
Senior Secured Credit Facilities
On April 27, 2009, Elfa entered into its senior secured credit facilities with Tjustbygdens Sparbank AB, which we refer to as Sparbank, which consist of a SEK 137,500,000 (approximately $20.8 million as of June 1, 2013) term loan facility, which we refer to as the Elfa Term Loan Facility, and a SEK 175,000,000 (approximately $26.4 million as of June 1, 2013) revolving credit facility, which we refer to as the Elfa Revolving Credit Facility and, together with the Elfa Term Loan Facility, the Elfa Senior Secured Credit Facilities. On January 27, 2012, Sparbank transferred all of its commitments, rights and obligations under the Elfa Senior Secured Credit Facilities to Swedbank AB. Borrowings under the Elfa Senior Secured Credit Facilities accrue interest at a rate of STIBOR+1.775%. The Elfa Term Loan Facility matures on August 30, 2014 and the Elfa Revolving Credit Facility matures on August 30, 2013, subject to automatic annual renewal as long as certain conditions are satisfied. Elfa is required to make quarterly principal repayments under the Elfa Term Loan Facility of SEK 6,250,000 (approximately $0.9 million as of June 1, 2013) through maturity.
The Elfa Senior Secured Credit Facilities are secured by first priority security interests in substantially all of Elfa's assets.
The Elfa Senior Secured Credit Facilities contain a number of covenants that, among other things, restrict Elfa's ability, subject to specified exceptions, to incur additional liens, sell or dispose of assets, pay dividends, merge with other companies, engage in businesses that are not in a related line of business and make guarantees. In addition, Elfa is required to maintain (i) a consolidated equity ratio (calculated as Elfa's consolidated total shareholders' equity divided by its consolidated total assets) of not less than 35% and (ii) a consolidated ratio of net debt to EBITDA (as defined in the Elfa Senior Secured Credit Facilities) not greater than 4.0, each tested as of the end of each quarter. As of June 1, 2013 Elfa was in compliance with all covenants and no Event of Default (as defined in the Elfa Senior Secured Credit Facilities) had occurred.
Events of default under the Elfa Senior Secured Credit Facilities include, but are not limited to: (i) nonpayment of any amount due under the credit agreement; (ii) failure to perform or observe covenants; (iii) nonpayment of any other amount owed to the lender; (iv) certain cross-defaults to other indebtedness; (v) bankruptcy or insolvency of Elfa or any of its subsidiaries; (vi) attachment of any assets of Elfa or any of its subsidiaries; and (vii) the occurrence of any other circumstances which give the lender reasonable grounds to assume that Elfa's conditions or ability to perform its obligations under the Elfa Senior Secured Credit Facilities have deteriorated significantly.
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Shares eligible for future sale
Immediately prior to this offering, there was no public market for our common stock. Future sales of substantial amounts of common stock in the public market, or the perception that such sales may occur, could adversely affect the market price of our common stock. Although we have applied to have our common stock listed on the New York Stock Exchange, we cannot assure you that there will be an active public market for our common stock.
Upon the closing of this offering, and giving effect to the Exchange, assuming that our preferred stock will be exchanged for shares of common stock assuming an initial public offering price per share of $ , the midpoint of the price range set forth on the cover of this prospectus, and that the closing occurs on July 1, 2013, we will have outstanding an aggregate of shares of common stock, assuming the issuance of shares of common stock offered by us in this offering. Of these shares, all shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.
The remaining shares of common stock will be "restricted securities," as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below.
Subject to the lock-up agreements described below and the provisions of Rules 144 and 701 under the Securities Act, these restricted securities will be available for sale in the public market as follows:
Date |
Number of shares |
|||
---|---|---|---|---|
On the date of this prospectus |
||||
90 days after the date of this prospectus |
||||
180 days after the date of this prospectus |
||||
In addition, of the 41,135 shares of our common stock that were subject to stock options outstanding as of July 1, 2013, options to purchase 8,227 shares of common stock were vested as of July 1, 2013 and, upon exercise, these shares will be eligible for sale subject to the lockup agreements described below and Rules 144 and 701 under the Securities Act.
Lock-up agreements
We and each of our executive officers and directors and LGP, which collectively hold % of our outstanding capital stock upon the closing of this offering and after giving effect to the Exchange, have agreed that, without the prior written consent of J.P. Morgan Securities LLC, Barclays Capital Inc. and Credit Suisse Securities (USA) LLC on behalf of the underwriters, we and they will not, subject to limited exceptions, during the period ending 180 days after the date of this prospectus, subject to extension in specified circumstances:
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convertible into or exercisable or exchangeable for common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such directors, executive officers and shareholders in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), or publicly disclose the intention to make any offer, sale, pledge or disposition; or
These agreements are subject to certain exceptions, as described in the section of this prospectus entitled "Underwriting."
Upon the expiration of the applicable lock-up periods, substantially all of the shares subject to such lock-up restrictions will become eligible for sale, subject to the limitations discussed above.
Rule 144
Affiliate resales of restricted securities
In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours, or who was an affiliate at any time during the 90 days before a sale, who has beneficially owned shares of our common stock for at least six months would be entitled to sell in "broker's transactions" or certain "riskless principal transactions" or to market makers, a number of shares within any three-month period that does not exceed the greater of:
Affiliate resales under Rule 144 are also subject to the availability of current public information about us. In addition, if the number of shares being sold under Rule 144 by an affiliate during any three-month period exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the SEC and the New York Stock Exchange concurrently with either the placing of a sale order with the broker or the execution directly with a market maker.
Non-affiliate resales of restricted securities
In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate of ours at the time of sale, and has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares subject only to the availability of current public information about us. If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public company requirement and the current public information requirement.
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Non-affiliate resales are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144.
Rule 701
In general, under Rule 701, any of an issuer's employees, directors, officers, consultants or advisors who purchases shares from the issuer in connection with a compensatory stock or option plan or other written agreement before the effective date of a registration statement under the Securities Act is entitled to sell such shares 90 days after such effective date in reliance on Rule 144. An affiliate of the issuer can resell shares in reliance on Rule 144 without having to comply with the holding period requirement, and non-affiliates of the issuer can resell shares in reliance on Rule 144 without having to comply with the current public information and holding period requirements.
The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after an issuer becomes subject to the reporting requirements of the Exchange Act.
Equity plans
We intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of common stock subject to outstanding stock options and common stock issued or issuable under our stock plans. We expect to file the registration statement covering shares offered pursuant to our stock plans shortly after the date of this prospectus, permitting the resale of such shares by nonaffiliates in the public market without restriction under the Securities Act and the sale by affiliates in the public market, subject to compliance with the resale provisions of Rule 144.
Registration rights
Upon the closing of this offering, the holders of shares of our common stock or their transferees will be entitled to various rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See "Certain Relationships and Related TransactionsStockholders Agreement" elsewhere in this prospectus for additional information. Shares covered by a registration statement will be eligible for sale in the public market upon the expiration or release from the terms of the lock-up agreement.
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Material U.S. federal income tax consequences
to non-U.S. holders
The following discussion is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering. This discussion is not a complete analysis of all potential U.S. federal income tax consequences relevant to a non-U.S. holder's individual circumstances and does not address any tax consequences arising under (i) any state, local or foreign tax laws, (ii) Section 1411 of the Internal Revenue Code of 1986, as amended (the "Code"), which generally imposes a 3.8% tax on net investment income or (iii) any other U.S. federal tax laws, including estate or gift tax laws. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service ("IRS") in effect as of the date of this prospectus. These authorities may change or be subject to differing interpretations. Any such change may be applied retroactively in a manner that could adversely affect a non-U.S. holder. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position regarding the tax consequences of the purchase, ownership and disposition of our common stock.
This discussion is limited to non-U.S. holders that hold our common stock as a "capital asset" within the meaning of Section 1221 of the Code (property held for investment). This discussion does not address consequences relevant to non-U.S. holders subject to particular rules, including, without limitation:
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner in the partnership (or owner in such other entity) will
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depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT INTENDED AS TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Definition of a non-U.S. holder
For purposes of this discussion, a "non-U.S. holder" is any beneficial owner of our common stock that is neither a "United States person" nor a partnership for U.S. federal income tax purposes. A United States person is any of the following:
Distributions
As described in the section entitled "Dividend Policy," we currently do not anticipate paying dividends to holders of our common stock in the foreseeable future. However, if we do make distributions on our common stock, such distributions of cash or property on our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a non-U.S. holder's adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described under the heading "Gain on Sale or Other Disposition of Shares of Our Common Stock" below.
Subject to the discussion below on backup withholding and foreign accounts, dividends paid to a non-U.S. holder of our common stock that are not effectively connected with the non-U.S. holder's conduct of a trade or business within the United States will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty).
Non-U.S. holders may be entitled to a reduction in or an exemption from withholding on dividends as a result of either (a) an applicable income tax treaty or (b) the non-U.S. holder holding our common stock in connection with the conduct of a trade or business within the United States and dividends being paid in connection with that trade or business. To claim such a reduction in or exemption from withholding, the
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non-U.S. holder must provide the applicable withholding agent with a properly executed (a) IRS Form W-8BEN claiming an exemption from or reduction of the withholding tax under the benefit of an income tax treaty between the United States and the country in which the non-U.S. holder resides or is established, or (b) IRS Form W-8ECI stating that the dividends are not subject to withholding tax because they are effectively connected with the conduct by the non-U.S. holder of a trade or business within the United States, as may be applicable. These certifications must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. Non-U.S. holders that do not timely provide the applicable withholding agent with the required certification, but that qualify for a reduced rate under an applicable income tax treaty, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
Subject to the discussion below on backup withholding and foreign accounts, if dividends paid to a non-U.S. holder are effectively connected with the non-U.S. holder's conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), then, although exempt from U.S. federal withholding tax (provided the non-U.S. holder provides appropriate certification, as described above), the non-U.S. holder will be subject to U.S. federal income tax on such dividends on a net income basis at the regular graduated U.S. federal income tax rates. In addition, a non-U.S. holder that is a corporation may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year that are attributable to such dividends, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
Gain on sale or other disposition of shares of our common stock
Subject to the discussions below on backup withholding and foreign accounts, a non-U.S. holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
Gain described in the first bullet point above will generally be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates. A non-U.S. holder that is a foreign corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year that are attributable to such gain, as adjusted for certain items.
A non-U.S. holder described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on any gain realized on the disposition, which may be offset by certain U.S. source capital losses of the non-U.S. holder (even though the individual is not considered a resident of the United States).
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With respect to the third bullet point above, we believe we are not currently and do not anticipate becoming a USRPHC. Because the determination of whether we are a USRPHC depends on the fair market value of our USRPIs relative to the fair market value of our other business assets and our non-U.S. real property interests, however, there can be no assurance we are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a non-U.S. holder of our common stock will not be subject to U.S. federal income tax if such class of stock is "regularly traded," as defined by applicable Treasury Regulations, on an established securities market, and such non-U.S. holder owned, actually or constructively, 5% or less of such class of our stock throughout the shorter of the five-year period ending on the date of the sale or other disposition or the non-U.S. holder's holding period for such stock.
Non-U.S. holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
Backup withholding and information reporting
A non-U.S. holder will not be subject to backup withholding with respect to payments of dividends on our common stock we make to the non-U.S. holder, provided the holder certifies its non-U.S. status, such as by providing a valid IRS Form W-8BEN or W-8ECI, or other applicable certification. However, information returns will be filed with the IRS in connection with any dividends on our common stock paid to the non-U.S. holder, regardless of whether any tax was actually withheld. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the non-U.S. holder resides or is established.
Information reporting and backup withholding may apply to the proceeds of a sale of our common stock within the United States, and information reporting may (although backup withholding generally will not) apply to the proceeds of a sale of our common stock outside the United States conducted through certain U.S.-related financial intermediaries, in each case, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder on IRS Form W-8BEN or other applicable form or such owner otherwise establishes an exemption.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder's U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional withholding tax on payments made to foreign accounts
Withholding taxes may be imposed under the Foreign Account Tax Compliance Act ("FATCA") on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or gross proceeds from the sale or other disposition of, our common stock paid to a "foreign financial institution" or a "non-financial foreign entity" (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any "substantial United States owners" (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain "specified United States persons" or "United States owned foreign entities" (each as defined in the
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Code), annually report certain information about such accounts, and withhold 30% on payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.
Under the applicable Treasury Regulations and a recent IRS Notice, withholding under FATCA generally will apply to payments of dividends on our common stock made on or after July 1, 2014 and to payments of gross proceeds from the sale or other disposition of such stock on or after January 1, 2017.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
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The following is a summary of certain considerations associated with the purchase of our common stock by employee benefit plans that are subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), by plans, individual retirement accounts and other arrangements that are subject to Section 4975 of the Code and or provisions under any other federal, state, local, non-U.S. or other laws or regulations, and by entities whose underlying assets are considered to include "plan assets" of any such plan, account or arrangement (each, a "Plan").
Prohibited transaction issues
Section 406 of ERISA and Section 4975 of the Code prohibit Plans which are subject to Title I of ERISA or Section 4975 of the Code ("ERISA Plans") from engaging in specified transactions involving plan assets with persons or entities who are "parties in interest," within the meaning of ERISA, or "disqualified persons," within the meaning of Section 4975 of the Code, unless an exemption is available. A party in interest or disqualified person who engaged in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and/or liabilities under ERISA and the Code. In addition, the fiduciary of the ERISA Plan that engaged in such a non-exempt prohibited transaction may be subject to penalties and liabilities under ERISA and the Code.
The acquisition and/or ownership of our common stock by an ERISA Plan with respect to which we or an underwriter is considered a party in interest or a disqualified person may constitute or result in a direct or indirect prohibited transaction under Section 406 of ERISA and/or Section 4975 of the Code, unless the investment is acquired in accordance with an applicable statutory, class or individual prohibited transaction exemption, of which there are many.
Plans which are governmental plans, certain church plans and non-U.S. plans may not be subject to the prohibited transaction provisions of ERISA or the Code but may be subject to similar laws. Fiduciaries of any such Plans should consult with counsel before acquisition or ownership of our common stock.
Because of the foregoing, our common stock should not be purchased by any person investing "plan assets" of any Plan, unless such purchase will not constitute a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code, or a similar violation of any applicable similar laws.
The foregoing discussion is general in nature and is not intended to be all inclusive. Due to the complexity of these rules and the penalties that may be imposed upon persons involved in non-exempt prohibited transactions, it is particularly important that fiduciaries, or other persons considering the acquisition or ownership of our common stock on behalf of, or with the assets of, any Plan, consult with their counsel regarding the potential applicability of ERISA, Section 4975 of the Code and any similar laws to such investment and whether an exemption would be applicable to the acquisition or ownership of our common stock.
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We are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC, Barclays Capital Inc. and Credit Suisse Securities (USA) LLC are acting as joint book-running managers and representatives of the underwriters and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC are also acting as joint book-running managers. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally and not jointly agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:
Name |
Number of shares |
|||
---|---|---|---|---|
J.P. Morgan Securities LLC |
||||
Barclays Capital Inc. |
||||
Credit Suisse Securities (USA) LLC |
||||
Morgan Stanley & Co, LLC |
||||
Merrill Lynch, Pierce, Fenner & Smith |
||||
Total |
||||
The underwriters are committed to purchase all the common shares offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.
The underwriters propose to offer the common shares directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters.
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
Option to purchase additional shares
The underwriters have an option to buy up to additional shares of common stock from us. The underwriters have 30 days from the date of this prospectus to exercise this option to purchase additional shares. If any shares are purchased with this option, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.
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Directed share program
At our request, the underwriters have reserved for sale at the initial public offering price up to approximately shares of our common stock being offered for sale to our directors, officers, and certain employees and other parties related to the Company. We will offer these shares to the extent permitted under applicable regulations in the United States and in various countries. Pursuant to the underwriting agreement, the sales will be made by through a directed share program. The number of shares of common stock available for sale to the general public will be reduced to the extent that such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered hereby. We have agreed to indemnify in connection with the directed share program, including for the failure of any participant to pay for its shares. Other than the underwriting discount described on the front cover of this prospectus, the underwriters will not be entitled to any commission with respect to shares of common stock sold pursuant to the directed share program. Shares offered in the directed share program will not be subject to lock-up agreements, with the exception of the shares to be issued to directors, officers, certain employees and certain existing stockholders who are already subject to lock-up agreements, as described below.
Underwriting discounts and expenses
The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $ per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.
|
Without option exercise |
With full option exercise |
|||||
---|---|---|---|---|---|---|---|
Per share |
$ | $ | |||||
Total |
$ | $ | |||||
We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $ . We have agreed to reimburse the underwriters for expenses related to clearing of this offering with the Financial Industry Regulatory Authority, Inc. ("FINRA") in an amount up to $ . Such reimbursement is deemed to be underwriting compensation by FINRA.
Lock-up
We have agreed that we will not:
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in each case without the prior written consent of the representatives for a period of 180 days after the date of this prospectus, other than the shares of our common stock to be sold hereunder and any shares of our common stock issued upon the exercise of options granted under our equity incentive plans.
Our directors, executive officers and LGP have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of the representatives:
Listing
We have applied to have our common stock approved for listing on the New York Stock Exchange under the symbol " ."
Price stabilization and short positions
In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' option to purchase additional shares referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider,
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among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.
The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representative of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.
These activities may have the effect of increasing or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the New York Stock Exchange, in the over-the-counter market or otherwise.
New issue of securities
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:
Neither we nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.
A prospectus in electronic format may be made available on the websites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.
Sales of shares made outside of the United States may be made by affiliates of the underwriters.
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Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Notice to prospective investors in the United Kingdom
This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
Notice to prospective investors in the European Economic Area
In relation to each Member State of the European Economic Area that has implemented the Prospectus Directive (each, a "Relevant Member State"), from and including the date on which the EU Prospectus Directive (as defined below) was implemented in that Relevant Member State (the "Relevant Implementation Date") an offer of securities described in this prospectus may not be made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares that has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that, with effect from and including the Relevant Implementation Date, an offer of securities described in this prospectus may be made to the public in that Relevant Member State at any time:
For the purposes of this provision, the expression an "offer of securities to the public" in relation to any securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by
141
any measure implementing the EU Prospectus Directive in that Member State. The expression "EU Prospectus Directive" means European Union Prospectus Directive 2003/71/EC (and any amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State, and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.
Notice to prospective investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission ("ASIC"), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the "Corporations Act"), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the securities may only be made to persons (the "Exempt Investors") who are "sophisticated investors" (within the meaning of section 708(8) of the Corporations Act), "professional investors" (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.
The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to prospective investors in the Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority ("DFSA"). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
142
Notice to prospective investors in Hong Kong
The securities have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the securities has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Notice to prospective investors in Switzerland
We have not and will not register with the Swiss Financial Market Supervisory Authority ("FINMA") as a foreign collective investment scheme pursuant to Article 119 of the Federal Act on Collective Investment Scheme of 23 June 2006, as amended ("CISA"), and accordingly the securities being offered pursuant to this prospectus have not and will not be approved, and may not be licenseable, with FINMA. Therefore, the securities have not been authorized for distribution by FINMA as a foreign collective investment scheme pursuant to Article 119 CISA and the securities offered hereby may not be offered to the public (as this term is defined in Article 3 CISA) in or from Switzerland. The securities may solely be offered to "qualified investors," as this term is defined in Article 10 CISA, and in the circumstances set out in Article 3 of the Ordinance on Collective Investment Scheme of 22 November 2006, as amended ("CISO"), such that there is no public offer. Investors, however, do not benefit from protection under CISA or CISO or supervision by FINMA. This prospectus and any other materials relating to the securities are strictly personal and confidential to each offeree and do not constitute an offer to any other person. This prospectus may only be used by those qualified investors to whom it has been handed out in connection with the offer described herein and may neither directly or indirectly be distributed or made available to any person or entity other than its recipients. It may not be used in connection with any other offer and shall in particular not be copied and/or distributed to the public in Switzerland or from Switzerland. This prospectus does not constitute an issue prospectus as that term is understood pursuant to Article 652a and/or 1156 of the Swiss Federal Code of Obligations. We have not applied for a listing of the securities on the SIX Swiss Exchange or any other regulated securities market in Switzerland, and consequently, the information presented in this prospectus does not necessarily comply with the information standards set out in the listing rules of the SIX Swiss Exchange and corresponding prospectus schemes annexed to the listing rules of the SIX Swiss Exchange.
Other relationships
Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.
143
J.P. Morgan Securities LLC and/or certain of its affiliates act as Joint Lead Arranger, Joint Bookrunning Manager, Administrative Agent, Collateral Agent and Lender under our Revolving Credit Facility and act as Joint Lead Arranger, Joint Bookrunning Manager, Administrative Agent and Collateral Agent under our Senior Secured Term Loan Facility; Barclays Capital Inc. and/or certain of its affiliates act as Co-Documentation Agent, Joint Lead Arranger and Joint Bookrunning Manager under our Senior Secured Term Loan Facility; and Morgan Stanley & Co. LLC and/or certain of its affiliates act as Co-Documentation Agent, Joint Lead Arranger and Joint Bookrunning Manager under our Senior Secured Term Loan Facility.
144
The validity of the shares of common stock offered hereby will be passed upon for us by Latham & Watkins LLP, New York, New York. Simpson Thacher & Bartlett LLP, New York, New York, has acted as counsel for the underwriters in connection with certain legal matters related to this offering.
The consolidated financial statements of The Container Store Group, Inc. at March 2, 2013 and February 25, 2012 and for each of the three years in the period ended March 2, 2013, appearing in this Prospectus and Registration Statement have been audited by Ernst and Young, LLP, an independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
Where you can find more information
We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed thereto. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. Upon the closing of this offering, we will be required to file periodic reports, proxy statements, and other information with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. You may read and copy this information at the Public Reference Room of the Securities and Exchange Commission, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference rooms by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains an Internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically with the Securities and Exchange Commission. The address of that site is www.sec.gov.
145
The Container Store Group, Inc.
Consolidated financial statements
|
Page |
|
---|---|---|
Contents |
||
Consolidated Financial Statements |
||
Report of Independent Registered Public Accounting Firm |
F-2 | |
Consolidated Balance Sheets |
F-3 | |
Consolidated Statements of Operations |
F-5 | |
Consolidated Statement of Comprehensive Income (Loss) |
F-6 | |
Consolidated Statements of Shareholders' Equity |
F-7 | |
Consolidated Statements of Cash Flows |
F-8 | |
Notes to Consolidated Financial Statements |
F-9 | |
Interim Consolidated Financial Statements (Unaudited) |
||
Consolidated Balance Sheets (Unaudited) |
F-33 | |
Consolidated Statements of Operations (Unaudited) |
F-35 | |
Consolidated Statement of Comprehensive Loss (Unaudited) |
F-36 | |
Consolidated Statements of Cash Flows (Unaudited) |
F-37 | |
Notes to Consolidated Financial Statements (Unaudited) |
F-38 |
F-1
Report of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders of
The Container Store Group, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of The Container Store Group, Inc. and subsidiaries (the Company) as of March 2, 2013 and February 25, 2012 and the related consolidated statements of operations, shareholders' equity, comprehensive income (loss), and cash flows for each of the three years in the period ended March 2, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
The selected quarterly financial data appearing under Interim Results and Seasonality within Management's Discussion and Analysis and the quarterly data for the period ended May 26, 2012 included in this registration statement contain information that we did not audit or review and accordingly, we do not express an opinion or any other form of assurance on that data.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Container Store Group, Inc. and subsidiaries at March 2, 2013 and February 25, 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 2, 2013, in conformity with U.S. generally accepted accounting principles.
/s/
Ernst & Young LLP
Dallas, Texas
July 12, 2013
F-2
The Container Store Group, Inc.
Consolidated balance sheets
(In thousands, except share amounts) |
March 2 2013 |
February 25 2012 |
|||||
---|---|---|---|---|---|---|---|
Assets |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ | 25,351 | $ | 51,163 | |||
Accounts receivable, net |
25,536 | 20,772 | |||||
Inventory |
82,443 | 70,626 | |||||
Prepaid expenses and other current assets |
21,284 | 13,876 | |||||
Forward contracts |
1,103 | 1,656 | |||||
Deferred tax assets, net |
1,505 | 1,203 | |||||
Total current assets |
157,222 | 159,296 | |||||
Noncurrent assets: |
|||||||
Property and equipment, net |
141,177 | 122,563 | |||||
Goodwill |
202,815 | 202,815 | |||||
Trade names |
241,940 | 255,876 | |||||
Deferred financing costs, net |
8,745 | 5,208 | |||||
Other assets |
921 | 920 | |||||
Total noncurrent assets |
595,598 | 587,382 | |||||
Total assets |
$ | 752,820 | $ | 746,678 | |||
See accompanying notes.
F-3
The Container Store Group, Inc.
Consolidated balance sheets (continued)
(In thousands, except share amounts) |
March 2 2013 |
February 25 2012 |
|||||
---|---|---|---|---|---|---|---|
Liabilities and shareholders' equity |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ | 54,334 | $ | 47,207 | |||
Accrued liabilities |
52,330 | 38,738 | |||||
Income taxes payable |
2,650 | 821 | |||||
Revolving lines of credit |
13,482 | 11,060 | |||||
Current portion of long-term debt |
9,023 | 7,605 | |||||
Total current liabilities |
131,819 | 105,431 | |||||
Noncurrent liabilities: |
|||||||
Long-term debt |
276,348 | 292,561 | |||||
Deferred tax liabilities, net |
87,770 | 95,145 | |||||
Deferred rent and other long-term liabilities |
23,508 | 20,552 | |||||
Total noncurrent liabilities |
387,626 | 408,258 | |||||
Total liabilities |
519,445 | 513,689 | |||||
Commitments and contingencies (Note 11) |
|||||||
Shareholders' equity: |
|||||||
Common stock, $0.01 par value, 600,000 shares authorized; 500,356 shares issued and 498,169 shares outstanding in 2012; 500,356 shares issued and 498,566 shares outstanding in 2011 |
5 | 5 | |||||
Preferred stock, $0.01 par value, 500,000 shares authorized: |
|||||||
Senior cumulative; 250,000 shares authorized; 202,480 shares issued and 202,196 shares outstanding in 2012; 202,480 shares issued and 202,266 shares outstanding in 2011 |
2 | 2 | |||||
Junior cumulative; 250,000 shares authorized; 202,480 shares issued and 202,196 shares outstanding in 2012; 202,480 shares issued and 202,266 shares outstanding in 2011 |
2 | 2 | |||||
Additional paid-in capital |
455,270 | 454,987 | |||||
Accumulated other comprehensive income |
2,713 | 2,299 | |||||
Retained deficit |
(223,830 | ) | (223,700 | ) | |||
Treasury stock, 2,755 shares in 2012 and 2,218 shares in 2011 |
(787 | ) | (606 | ) | |||
Total shareholders' equity |
233,375 | 232,989 | |||||
Total liabilities and shareholders' equity |
$ | 752,820 | $ | 746,678 | |||
See accompanying notes.
F-4
The Container Store Group, Inc.
Consolidated statements of operations
|
Fiscal year ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(In thousands, except share and per share amounts) |
March 2 2013 |
February 25 2012 |
February 26 2011 |
|||||||
Net sales |
$ | 706,757 | $ | 633,619 | $ | 568,820 | ||||
Cost of sales (excluding depreciation and amortization) |
291,146 | 266,355 | 235,295 | |||||||
Gross profit |
415,611 | 367,264 | 333,525 | |||||||
Selling, general, and administrative expenses (excluding depreciation and amortization) |
331,380 |
293,665 |
269,474 |
|||||||
Pre-opening costs |
7,562 | 5,203 | 1,747 | |||||||
Goodwill and trade name impairment |
15,533 | 47,037 | 52,388 | |||||||
Depreciation and amortization |
29,550 | 27,451 | 24,354 | |||||||
Restructuring charges |
6,369 | 133 | 341 | |||||||
Other expenses |
987 | 193 | | |||||||
Loss on disposal of assets |
88 | 210 | 139 | |||||||
Income (loss) from operations |
24,142 | (6,628 | ) | (14,918 | ) | |||||
Interest expense |
21,388 | 25,417 | 26,006 | |||||||
Loss on extinguishment of debt |
7,333 | | | |||||||
Loss before taxes |
(4,579 | ) | (32,045 | ) | (40,924 | ) | ||||
(Benefit) provision for income taxes |
(4,449 |
) |
(1,374 |
) |
4,129 |
|||||
Net loss |
$ | (130 | ) | $ | (30,671 | ) | $ | (45,053 | ) | |
Less: Unpaid dividends accumulated to preferred shareholders |
(90,349 | ) | (78,575 | ) | (69,723 | ) | ||||
Net loss available to common shareholders |
$ | (90,479 | ) | $ | (109,246 | ) | $ | (114,776 | ) | |
Basic and diluted net loss per common share |
$ |
(181.60 |
) |
$ |
(219.10 |
) |
$ |
(230.05 |
) |
|
Shares used in determination of net loss per share: |
||||||||||
Basic and diluted |
498,225 | 498,600 | 498,905 | |||||||
See accompanying notes.
F-5
The Container Store Group, Inc.
Consolidated statements of comprehensive income (loss)
|
Fiscal year ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(In thousands) |
March 2 2013 |
February 25 2012 |
February 26 2011 |
|||||||
Net loss |
$ | (130 | ) | $ | (30,671 | ) | $ | (45,053 | ) | |
Unrealized (loss) gain on financial instruments, net of taxes |
(104 | ) | (583 | ) | 1,038 | |||||
Pension liability adjustment, net of taxes |
(298 | ) | (120 | ) | (203 | ) | ||||
Foreign currency translation adjustment |
816 | (3,848 | ) | 9,321 | ||||||
Comprehensive income (loss) |
$ | 284 | $ | (35,222 | ) | $ | (34,897 | ) | ||
See accompanying notes.
F-6
The Container Store Group, Inc.
Consolidated statements of shareholders' equity
(In thousands, except share amounts) |
Common stock |
Senior Preferred Stock |
Junior Preferred Stock |
Additional paid-in capital |
Accumulated other comprehensive income (loss) |
Retained deficit |
Treasury stock |
Total shareholders' equity |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at February 27, 2010 |
$ | 5 | $ | 2 | $ | 2 | $ | 454,987 | $ | (3,306 | ) | $ | (147,976 | ) | $ | (413 | ) | $ | 303,301 | ||||||
Net loss |
| | | | | (45,053 | ) | | (45,053 | ) | |||||||||||||||
Foreign currency translation adjustment |
| | | | 9,321 | | | 9,321 | |||||||||||||||||
Unrealized gain on financial instruments, net of taxes of $967 |
| | | | 1,038 | | | 1,038 | |||||||||||||||||
Pension liability adjustment, net of taxes of $28 |
| | | | (203 | ) | | | (203 | ) | |||||||||||||||
Purchases of treasury stock |
| | | | | | (177 | ) | (177 | ) | |||||||||||||||
Balance at February 26, 2011 |
5 | 2 | 2 | 454,987 | 6,850 | (193,029 | ) | (590 | ) | 268,227 | |||||||||||||||
Net loss |
| | | | | (30,671 | ) | | (30,671 | ) | |||||||||||||||
Foreign currency translation adjustment |
| | | | (3,848 | ) | | | (3,848 | ) | |||||||||||||||
Unrealized loss on financial instruments, net of taxes of $160 |
| | | | (583 | ) | | | (583 | ) | |||||||||||||||
Pension liability adjustment, net of taxes of $71 |
| | | | (120 | ) | | | (120 | ) | |||||||||||||||
Purchases of treasury stock |
| | | | | | (16 | ) | (16 | ) | |||||||||||||||
Balance at February 25, 2012 |
5 | 2 | 2 | 454,987 | 2,299 | (223,700 | ) | (606 | ) | 232,989 | |||||||||||||||
Net loss |
| | | | | (130 | ) | | (130 | ) | |||||||||||||||
Stock option expense |
| | | 283 | | | | 283 | |||||||||||||||||
Foreign currency translation adjustment |
| | | | 816 | | | 816 | |||||||||||||||||
Unrealized loss on financial instruments, net of taxes of $265 |
| | | | (104 | ) | | | (104 | ) | |||||||||||||||
Pension liability adjustment, net of taxes of $95 |
| | | | (298 | ) | | | (298 | ) | |||||||||||||||
Purchases of treasury stock |
| | | | | | (181 | ) | (181 | ) | |||||||||||||||
Balance at March 2, 2013 |
$ | 5 | $ | 2 | $ | 2 | $ | 455,270 | $ | 2,713 | $ | (223,830 | ) | $ | (787 | ) | $ | 233,375 | |||||||
See accompanying notes.
F-7
The Container Store Group, Inc.
Consolidated statements of cash flows
|
Fiscal year ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(In thousands) |
March 2 2013 |
February 25 2012 |
February 26 2011 |
|||||||
Operating activities |
||||||||||
Net loss |
$ | (130 | ) | $ | (30,671 | ) | $ | (45,053 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||||
Depreciation and amortization |
29,550 | 27,451 | 24,354 | |||||||
Loss on disposal of property and equipment |
88 | 210 | 139 | |||||||
Deferred tax (benefit) expense |
(7,906 | ) | (3,396 | ) | 1,556 | |||||
Noncash refinancing expense |
4,843 | | | |||||||
Noncash interest |
1,462 | 1,276 | 1,276 | |||||||
Goodwill and trade name impairment |
15,533 | 47,037 | 52,388 | |||||||
Other |
203 | 466 | 593 | |||||||
Changes in operating assets and liabilities: |
||||||||||
Accounts receivable |
(4,501 | ) | (751 | ) | 169 | |||||
Inventory |
(10,802 | ) | (6,491 | ) | (6,101 | ) | ||||
Prepaid expenses and other assets |
(6,425 | ) | 547 | (149 | ) | |||||
Taxes receivable |
| | 7,862 | |||||||
Accounts payable and accrued liabilities |
20,444 | 6,024 | 6,402 | |||||||
Taxes payable |
368 | (1,881 | ) | 3,049 | ||||||
Other noncurrent liabilities |
2,459 | 2,649 | 2,279 | |||||||
Net cash provided by operating activities |
45,186 | 42,470 | 48,764 | |||||||
Investing activities |
||||||||||
Additions to property and equipment |
(48,559 | ) | (41,220 | ) | (18,175 | ) | ||||
Acquisition of a business, excluding cash acquired |
| (274 | ) | | ||||||
Proceeds from sale of property and equipment |
314 | 24 | 18 | |||||||
Net cash used in investing activities |
(48,245 | ) | (41,470 | ) | (18,157 | ) | ||||
Financing activities |
||||||||||
Net borrowings (payments) on revolving lines of credit |
2,108 | 6,914 | (812 | ) | ||||||
Borrowings on long-term debt |
275,000 | | | |||||||
Payments on long-term debt |
(289,727 | ) | (6,731 | ) | (6,254 | ) | ||||
Payment of debt issuance costs |
(9,842 | ) | | | ||||||
Purchase of treasury shares |
(201 | ) | (16 | ) | (177 | ) | ||||
Reissuance of treasury shares |
20 | | | |||||||
Net cash (used in) provided by financing activities |
(22,642 | ) | 167 | (7,243 | ) | |||||
Effect of exchange rate changes on cash |
(111 |
) |
240 |
230 |
||||||
Net (decrease) increase in cash and cash equivalents |
(25,812 | ) | 1,407 | 23,594 | ||||||
Cash and cash equivalents at beginning of fiscal year |
51,163 | 49,756 | 26,162 | |||||||
Cash and cash equivalents at end of fiscal year |
$ | 25,351 | $ | 51,163 | $ | 49,756 | ||||
Supplemental information |
||||||||||
Cash paid during the year for: |
||||||||||
Interest |
$ | 17,853 | $ | 24,163 | $ | 25,398 | ||||
Taxes |
$ | 2,028 | $ | 3,371 | $ | 4,351 | ||||
See accompanying notes.
F-8
The Container Store Group, Inc.
Notes to consolidated financial statements
(In thousands, except share amounts and unless
otherwise stated) March 2, 2013
1. Nature of business and summary of significant accounting policies
Description of business
The Container Store, Inc. was founded in 1978 in Dallas, Texas, as a retailer with a mission to provide customers with storage and organization solutions through an assortment of innovative products and unparalleled customer service. In 2007, The Container Store, Inc. was sold to The Container Store Group, Inc. (the Company and formerly known as TCS Holdings, Inc.), a holding company, of which a majority stake was purchased by Leonard Green and Partners, L.P., with the remainder held by certain employees of The Container Store, Inc. The Company is headquartered in Coppell, Texas, and operates 58 specialty retail stores in 22 states and the District of Columbia, and a direct retail business through a call center and website, all of which sell storage and organization items as The Container Store®. The Container Store, Inc's wholly owned Swedish subsidiary, Elfa International AB (Elfa), manufactures and sells comprehensive, component-based storage systems, including wire drawer systems, shelving systems, wood décor, and sliding doors. These products provide order and organization in the home and in the workplace environment and are sold exclusively in the United States in The Container Store® retail stores and throughout Continental Europe. The Company also provides in-home installation services for retail customers in geographic areas surrounding its retail store locations through The Container Store Services, LLC, a wholly owned subsidiary of The Container Store, Inc.
During fiscal 2012, Elfa implemented a plan to restructure its business operations to improve efficiency. In conjunction with these efforts, a subsidiary sales office in Germany was sold and a manufacturing facility in Norway was shut down and consolidated into a like facility in Sweden. Additionally, certain head office functions in sales and marketing were relocated from the Västervik, Sweden, manufacturing location to the group headquarters in Malmö, Sweden. In conjunction with these moves, $6,369 of charges were incurred and recorded as restructuring charges during fiscal 2012, $4,489 of which is severance.
Basis of presentation
The accompanying consolidated financial statements include the accounts of the Company and all subsidiaries. All significant intercompany transactions have been eliminated in consolidation.
Fiscal year
The Company's fiscal year ends on the Saturday closest to February 28th. Elfa's fiscal year ends on the last day of the calendar month of February. The fiscal year ended March 2, 2013 (2012) included 53 weeks, whereas the fiscal years ended February 25, 2012 (2011) and February 26, 2011 (2010) included 52 weeks.
Management estimates
The preparation of the Company's consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Significant accounting judgments and estimates include fair value estimates for indefinite-lived intangible assets, inventory loss reserve, and assessment of valuation allowances on deferred tax assets.
F-9
Foreign currency translation
The Company operates foreign subsidiaries in the following countries: Sweden, Norway, Finland, Denmark, Germany, Poland, and France. The functional currency of the Company's foreign operations is the applicable country's currency. All assets and liabilities of foreign subsidiaries and affiliates are translated at year-end rates of exchange. Revenues and expenses of foreign subsidiaries and affiliates are translated at weighted-average rates of exchange for the year. Realized losses of $55 and $66 and realized gains of $1,269 are included in selling, general, and administrative expenses in the consolidated statements of operations in fiscal 2012, fiscal 2011, and fiscal 2010 respectively. Unrealized gains and losses are reported as cumulative translation adjustments through other comprehensive income (loss).
The functional currency for the Company's wholly owned subsidiary, Elfa, is the Swedish krona. During fiscal 2012, the rate of exchange from Swedish krona to U.S. dollar declined from 6.6 to 6.5. The carrying amount of net assets related to Elfa and subject to currency fluctuation is $142,840 and $159,237 as of March 2, 2013 and February 25, 2012, respectively.
Revenue recognition
Revenue from sales related to retail operations is recognized when the merchandise is delivered to the customer at the point of sale. Revenue from sales that are shipped or delivered directly to customers is recognized upon estimated delivery to the customer and includes applicable shipping or delivery revenue. Revenue from sales that are installed is recognized upon completion of the installation service to the customer and includes applicable installation revenue. Revenue from sales related to manufacturing operations is recorded upon shipment. Sales are recorded net of sales taxes collected from customers. A sales return allowance is recorded for estimated returns of merchandise subsequent to the balance sheet date that relate to sales prior to the balance sheet date. The returns allowance is based on historical return patterns and reduces sales and cost of sales, accordingly. Merchandise exchanges of similar product and price are not considered merchandise returns and, therefore, are excluded when calculating the sales returns allowance.
Gift cards and merchandise credits
Gift cards are sold to customers in retail stores, through the call center and website, and through selected third parties. We issue merchandise credits in our stores and through our call center. Revenue from sales of gift cards and issuances of merchandise credits is recognized when the gift card is redeemed by the customer, or the likelihood of the gift card being redeemed by the customer is remote (gift card breakage). The gift card breakage rate is determined based upon historical redemption patterns. (An estimate of the rate of gift card breakage is applied over the period of estimated performance (48 months as of the end of 2012) and the breakage amounts are included in net sales in the consolidated statement of operations.) The Company recorded $695, $675, and $678 of gift card breakage in fiscal years 2012, 2011, and 2010, respectively.
Cost of sales
Cost of sales related to retail operations includes the purchase cost of inventory sold (net of vendor rebates), in-bound freight, as well as inventory loss reserves. Costs incurred to ship or deliver merchandise to customers, as well as direct installation costs, are also included in cost of sales. Cost of sales from manufacturing operations includes direct costs associated with production, primarily materials and wages.
Leases
Rent expense on operating leases, including rent holidays and scheduled rent increases, is recorded on a straight-line basis over the term of the lease, commencing on the date the Company takes possession of
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the leased property. Rent expense is recorded in selling, general, and administrative expenses. Pre-opening rent expense is recorded in pre-opening costs in the consolidated income statement. The net excess of rent expense over the actual cash paid has been recorded as deferred rent in the accompanying consolidated balance sheets. Tenant improvement allowances are also included in the accompanying consolidated balance sheets as deferred rent liabilities and are amortized as a reduction of rent expense over the term of the lease from the possession date. Contingent rental payments, typically based on a percentage of sales, are recognized in rent expense when payment of the contingent rent is probable.
Advertising
All advertising costs of the Company are expensed when incurred, except for production costs related to catalogs and direct mailings to customers, which are initially capitalized. Production costs related to catalogs and direct mailings consist primarily of printing and postage and are expensed when mailed to the customer. All advertising costs are included in selling, general, and administrative expenses.
Catalog costs capitalized at March 2, 2013 and February 25, 2012, amounted to $628 and $823, respectively, and are recorded in prepaid expenses and other current assets on the accompanying consolidated balance sheets. Total advertising expense incurred for fiscal years 2012, 2011, and 2010, was $50,158, $46,511, and $39,519, respectively.
New store pre-opening costs
Non-capital expenditures associated with opening new stores, including rent, marketing expenses, travel and relocation costs, and training costs, are expensed as incurred and are included in pre-opening costs in the consolidated statement of operations.
Management Fee
The Company paid $1,000, $500, and $0 as a management fee to its majority shareholder, Leonard Green and Partners, L.P. in fiscal years 2012, 2011, and 2010, respectively.
Income taxes
We account for deferred income taxes utilizing Financial Accounting Standards Board Accounting Standards Codification ("ASC") 740, Income Taxes. ASC 740 requires an asset and liability approach, which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. When a net deferred asset position exists, such as with our TCS segment, a three-year cumulative financial loss before income taxes is indicative that realization of a deferred tax asset is in doubt. As a result, valuation allowances are established against deferred tax assets when it is more-likely-than-not that the realization of those deferred tax assets will not occur. Valuation allowances are released as positive evidence of future taxable income sufficient to realize the underlying deferred tax assets becomes available (e.g., three-year cumulative financial income).
Deferred tax assets and liabilities are measured using the enacted tax rates in effect in the years when those temporary differences are expected to reverse. The effect on deferred taxes from a change in the tax rate is recognized through continuing operations in the period that includes the enactment of the change. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future.
We operate in certain jurisdictions outside the United States. ASC 740-30 provides that the undistributed earnings of a foreign subsidiary be accounted for as a temporary difference under the presumption that all undistributed earnings will be distributed to the parent company as a dividend. Sufficient evidence of the intent to permanently reinvest the earnings in the jurisdiction where earned precludes a company from
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recording the temporary difference. For purposes of ASC 740-30, we are partially reinvested in Elfa and thus do not record a temporary difference. We are partially reinvested since we have permanently reinvested our past earnings at Elfa; however, we do not assert that all future earnings will be reinvested into Elfa.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and investments with original maturities of three months or less.
Accounts receivable
Accounts receivable are presented net of allowances for doubtful accounts of $266 and $204 at March 2, 2013 and February 25, 2012, respectively. An allowance for doubtful accounts is established, if necessary, for estimated losses resulting from the inability of customers to make required payments. Factors such as payment terms, historical loss experience, and economic conditions are generally considered in determining the allowance for doubtful accounts.
Inventories
Inventories at retail stores are comprised of finished goods and are valued at the lower of cost or market, with cost determined on a weighted-average cost method including associated freight costs, and market determined based on the estimated net realizable value. Manufacturing inventories are comprised of raw materials, work in process, and finished goods and are valued on a first-in, first out basis using full absorption accounting which includes material, labor, other variable costs, and other applicable manufacturing overhead. To determine if the value of inventory is recoverable at cost, we consider current and anticipated demand, customer preference and the merchandise age. The significant estimates used in inventory valuation are obsolescence (including excess and slow-moving inventory) and estimates of inventory shrinkage. We adjust our inventory for obsolescence based on historical trends, aging reports, specific identification and our estimates of future retail sales prices.
Reserves for shrinkage are estimated and recorded throughout the period as a percentage of cost of sales based on historical shrinkage results and current inventory levels. Actual shrinkage is recorded throughout the year based upon periodic cycle counts. Actual inventory shrinkage can vary from estimates due to factors including the mix of our inventory and execution against loss prevention initiatives in our stores and distribution center.
Property and equipment
Property and equipment are recorded at cost less accumulated depreciation. Significant additions and improvements are capitalized, and expenditures for maintenance and repairs are expensed. Gains and losses on the disposition of property and equipment are recognized in the period incurred.
Depreciation, including amortization of assets recorded under capital lease obligations, is provided using the straight-line method over the estimated useful lives of depreciable assets as follows:
Buildings |
30 years | |
Furniture, fixtures, and equipment |
3 to 10 years | |
Computer software |
2 to 5 years | |
Leasehold improvements |
Shorter of useful life or lease term | |
Costs of developing or obtaining software for internal use or developing the Company's website, such as external direct costs of materials or services and internal payroll costs related to the software development
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projects, are capitalized. For the fiscal years ended March 2, 2013, February 25, 2012, and February 26, 2011, the Company capitalized $3,252, $2,597, and $1,943, respectively, and amortized $2,210, $1,743, and $1,410, respectively, of costs in connection with the development of internally used software.
Long-lived assets
Long-lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, a product recall or an adverse action or assessment by a regulator. If the sum of the estimated undiscounted future cash flows related to the asset are less than the carrying value, we recognize a loss equal to the difference between the carrying value and the fair value, usually determined by the estimated undiscounted cash flow analysis of the asset.
For our TCS segment, we evaluate long-lived tangible assets at an individual store level, which is the lowest level at which independent cash flows can be identified. We evaluate corporate assets or other long-lived assets that are not store-specific at the consolidated level. For our Elfa segment, we evaluate long-lived tangible assets at an individual subsidiary level.
Since there is typically no active market for our long-lived tangible assets, we estimate fair values based on the expected future cash flows. We estimate future cash flows based on store-level historical results, current trends, and operating and cash flow projections. Our estimates are subject to uncertainty and may be affected by a number of factors outside our control, including general economic conditions and the competitive environment. While we believe our estimates and judgments about future cash flows are reasonable, future impairment charges may be required if the expected cash flow estimates, as projected, do not occur or if events change requiring us to revise our estimates.
Foreign currency forward contracts
We account for foreign currency forward contracts in accordance with ASC No. 815, Derivatives and Hedging. We utilize foreign currency forward contracts in Swedish krona to stabilize our retail gross margins and to protect our domestic operations from downward currency exposure by hedging purchases of inventory from Elfa. All currency-related hedge instruments have terms from 1 to 12 months and require us to exchange currencies at agreed-upon rates at settlement. We do not hold or enter into financial instruments for trading or speculative purposes. We record all financial instruments on a gross basis. We account for all foreign currency forward contracts as cash flow hedges, as defined. All financial instruments are recorded on the consolidated balance sheet at fair value. Changes in fair value that are considered to be effective are recorded in other comprehensive income (loss) until the hedged item (inventory) is sold to the customer, at which time the deferred gain or loss is recognized through cost of sales. Any portion of a change in the fair value that is considered to be ineffective is immediately recorded in earnings as cost of sales.
Intangibles
Goodwill
We evaluate goodwill annually to determine whether it is impaired. Goodwill is also tested between annual impairment tests if an event occurs or circumstances change that would indicate that the fair value of a reporting unit is less than its carrying amount. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset. If an impairment indicator exists, we test the intangible asset for recoverability. We have
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identified two reporting units and we have selected the fourth fiscal quarter to perform our annual goodwill impairment testing.
Prior to testing goodwill for impairment, we perform a qualitative assessment to determine whether it is more likely than not that goodwill is impaired for each reporting unit. If the results of the qualitative assessment indicate that the likelihood of impairment is greater than 50%, then we perform a two-step impairment test on goodwill. In the first step, we compare the fair value of the reporting unit to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is considered not impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step of the impairment test in order to determine the implied fair value of the reporting unit's goodwill. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then we would record an impairment loss equal to the difference.
The fair value of each reporting unit is determined by using a discounted cash flow analysis using the income approach. We also use a market approach to compare the estimated fair value to comparable companies. The determination of fair value requires assumptions and estimates of many critical factors, including among others, our nature and our history, financial and economic conditions affecting us, our industry and the general economy, past results, our current operations and future prospects, sales of similar businesses or capital stock of publicly held similar businesses, as well as prices, terms and conditions affecting past sales of similar businesses. Forecasts of future operations are based, in part, on operating results and management's expectations as to future market conditions. These types of analyses contain uncertainties because they require management to make assumptions and to apply judgments to estimate industry economic factors and the profitability of future business strategies. If actual results are not consistent with our estimates and assumptions, we may be exposed to future impairment losses that could be material.
Our tests for impairment of goodwill resulted in a determination that the fair value of the Elfa reporting unit was less than the carrying value in fiscal 2011 and fiscal 2010.
Trade names
We annually evaluate whether the trade names continue to have an indefinite life. Trade names are reviewed for impairment annually in the fourth quarter and may be reviewed more frequently if indicators of impairment are present. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of an asset, a product recall or an adverse action or assessment by a regulator.
The impairment review is performed by comparing the carrying value to the estimated fair value, determined using a discounted cash flow methodology. If the recorded carrying value of the trade name exceeds its estimated fair value, an impairment charge is recorded to write the trade name down to its estimated fair value. Factors used in the valuation of intangible assets with indefinite lives include, but are not limited to, future revenue growth assumptions, estimated market royalty rates that could be derived from the licensing of our trade names to third parties, and a rate used to discount the estimated royalty cash flow projections to their present value (or estimated fair value).
The valuation of trade names requires assumptions and estimates of many critical factors, which are consistent with the factors discussed under "Goodwill" above. Forecasts of future operations are based, in part, on operating results and management's expectations as to future market conditions. These types of analyses contain uncertainties because they require management to make assumptions and to apply
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judgments to estimate industry economic factors and the profitability of future business strategies. If actual results are not consistent with our estimates and assumptions, we may be exposed to future impairment losses that could be material.
Treasury stock
Purchases and sales of treasury stock are recorded at cost.
Fair value of financial instruments
As of March 2, 2013, the Company held certain items that are required to be measured at fair value on a recurring basis. These included cash and cash equivalents, foreign currency forward contracts, and a nonqualified retirement plan. See Note 13 for further information regarding the fair value of financial instruments.
Recent accounting pronouncements
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, an amendment to ASC 220, Comprehensive Income. ASU 2013-02 requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other items not reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. These standards, which are prospective, are effective for reporting periods beginning after December 15, 2012, with earlier adoption permitted. The Company does not believe the implementation of this standard will result in a material impact to its financials.
2. Goodwill and trade names
The Company recorded goodwill impairment charges of $0, $31,453, and $51,971 related to the Elfa reporting unit in fiscal 2012, fiscal 2011, and fiscal 2010, respectively. During fiscal 2011 and fiscal 2010, Elfa experienced a challenging economic climate in Europe, which resulted in Elfa not achieving its sales and profit plans. This decline in profitability, coupled with near-term financial forecasts and the continued European economic downturn, resulted in an estimated fair value that was lower than the carrying value of the reporting unit. The reporting unit's estimated fair value was calculated using an income approach based on the present value of future cash flows of the reporting unit. The allocation of the estimated fair value to the fair value of the reporting unit's assets and liabilities in a hypothetical purchase price allocation resulted in the goodwill impairment charges, which ultimately represented a complete impairment of goodwill for the Elfa reporting unit as of February 25, 2012. The Company did not record a goodwill impairment charge for The Container Store, Inc. reporting unit in fiscal 2012, fiscal 2011, or fiscal 2010.
The Company also recorded trade name impairment charges of $15,533, $15,584, and $417 related to the Elfa reporting unit in fiscal 2012, fiscal 2011, and fiscal 2010, respectively. The fair value of the trade name was calculated using a relief from the royalty discounted cash flow approach. The decline in sales of the Elfa reporting unit, coupled with near-term sales forecasts and an increased weighted-average cost of capital, resulted in an estimated fair value that was lower than the carrying value of the trade name. The projected cash flows were compared to the trade name carrying value, which resulted in the impairment. The Company did not record a trade name impairment charge for The Container Store, Inc. reporting unit in fiscal 2012, fiscal 2011, or fiscal 2010.
F-15
The estimated fair values discussed above are computed using estimates as of the measurement date, which is defined as the fiscal month-end of December. The Company makes estimates and assumptions about sales, gross margins, profit margins, and discount rates based on budgets and forecasts, business plans, economic projections, anticipated future cash flows, and marketplace data. Assumptions are also made for varying perpetual growth rates for periods beyond the long-term business plan period. There are inherent uncertainties related to these factors and management's judgment in applying these factors. Another estimate using different, but still reasonable, assumptions could produce different results. As there are numerous assumptions and estimations utilized to derive the estimated enterprise fair value of each reporting unit, it is possible that actual results may differ from estimated results requiring future impairment charges.
The changes in the carrying amount of goodwill and trade names were as follows in fiscal 2011 and fiscal 2012:
|
Goodwill |
Trade names |
|||||
---|---|---|---|---|---|---|---|
Balance at February 26, 2011 |
$ | 227,503 | $ | 274,844 | |||
Impairment charge |
(31,453 | ) | (15,584 | ) | |||
Acquisition of The Container Store Services, LLC |
6,200 | | |||||
Other acquisition |
881 | | |||||
Foreign currency translation adjustments |
(316 | ) | (3,384 | ) | |||
Balance at February 25, 2012 |
202,815 | 255,876 | |||||
Impairment charge |
| (15,533 | ) | ||||
Foreign currency translation adjustments |
| 1,597 | |||||
Balance at March 2, 2013 |
$ | 202,815 | $ | 241,940 | |||
3. Inventory
The components of inventory are summarized below:
|
March 2 2012 |
February 25 2012 |
|||||
---|---|---|---|---|---|---|---|
Raw materials |
$ | 5,657 | $ | 6,173 | |||
Work in progress |
1,983 | 2,055 | |||||
Finished goods |
74,803 | 62,398 | |||||
|
$ | 82,443 | $ | 70,626 | |||
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4. Property and equipment
Property and equipment consist of the following:
|
March 2 2013 |
February 25 2012 |
|||||
---|---|---|---|---|---|---|---|
Land and buildings |
$ | 30,845 | $ | 22,341 | |||
Furniture and fixtures |
29,419 | 25,029 | |||||
Machinery and equipment |
74,691 | 71,491 | |||||
Computer software and equipment |
26,097 | 18,753 | |||||
Leasehold improvements |
98,890 | 80,993 | |||||
Construction in progress |
16,495 | 17,720 | |||||
|
276,437 | 236,327 | |||||
Less accumulated depreciation and amortization |
(135,260 | ) | (113,764 | ) | |||
|
$ | 141,177 | $ | 122,563 | |||
Depreciation expense was $29,449, $27,434, and $24,354 in fiscal years 2012, 2011, and 2010, respectively.
5. Long-term debt and revolving lines of credit
Long-term debt and revolving lines of credit consist of the following:
|
March 2 2013 |
February 25 2012 |
|||||
---|---|---|---|---|---|---|---|
Secured term loan, U.S. ($125 million) |
$ | | $ | 115,684 | |||
Secured term loan, U.S. ($275 million) |
272,938 | | |||||
Secured term loan, Sweden |
5,812 | 9,492 | |||||
Senior subordinated notes |
| 165,549 | |||||
Secured revolving credit, U.S. |
| | |||||
Mortgage and other loans |
6,621 | 9,441 | |||||
|
285,371 | 300,166 | |||||
Less current portion |
(9,023 | ) | (7,605 | ) | |||
|
$ | 276,348 | $ | 292,561 | |||
Secured revolving credit, Sweden |
$ | 13,482 | $ | 11,060 | |||
Scheduled total revolving lines of credit and debt maturities for the fiscal years subsequent to March 2, 2013, are as follows:
2013 |
$ | 22,505 | ||
2014 |
6,556 | |||
2015 |
2,990 | |||
2016 |
2,993 | |||
2017 |
3,008 | |||
Thereafter |
260,801 | |||
|
$ | 298,853 | ||
On April 6, 2012, the Company's debt was refinanced, whereby a new $275 million Secured Term Loan was entered into, replacing the previously existing $125 million Secured Term Loan and $150 million Senior
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Subordinated Notes. The Company recorded expenses of $7,333 in fiscal 2012 associated with this refinancing transaction. This amount consisted of $1,655 million related to an early extinguishment fee on the Senior Subordinated Notes and $4,843 of deferred financing costs where accelerated amortization was required. We also recorded legal fees and other associated costs of $835. See below for more details regarding the new debt instruments.
Secured term loan facility, U.S. ($275 million)
On April 6, 2012, The Container Store, Inc. entered into a $275 million secured term loan facility with JPMorgan Chase Bank, N.A. as Administrative Agent and Collateral Agent, with Barclays Bank PLC, Morgan Stanley Senior Funding, Inc., and Wells Fargo Bank N.A. as Co-Documentation Agents. Borrowings under the secured term loan accrue interest at LIBOR plus 5.0%, subject to a LIBOR floor of 1.25. All obligations under the secured term loan facility are fully, unconditionally, and jointly and severally guaranteed by each of The Container Store Group, Inc. and our domestic subsidiaries. The term loan is secured by (a) a first priority security interest in substantially all of the assets of the Company and (b) a security interest, junior in priority, in the assets securing the asset-based revolving credit facility described below. The Company is required to maintain a senior secured leverage ratio in which senior secured indebtedness, net of unrestricted cash and cash equivalents, is greater than $10 million. Such ratio is tested as of the last day of any fiscal quarter. The current permitted maximum for this ratio is 5.25 to 1.00. Such requirement steps down over time to 3.75 to 1.00. The Company was compliant with this financial covenant at March 2, 2013. Under the term loan, the Company is required to make quarterly principal repayments of $687 through December 31, 2018, with a balloon payment for the remaining balance of $256,438 due on April 6, 2019.
Secured term loan facility, U.S. ($125 million)
On August 16, 2007, The Container Store, Inc. entered into a $125 million secured term loan facility with JPMorgan Chase Bank, N.A. as Administrative Agent and Collateral Agent; Wachovia Bank, N.A. as Syndication Agent; and GMAC Commercial Finance, LLC and Wells Fargo Bank, N.A. as Co-Documentation Agents. Borrowings under the secured term loan accrued interest at floating rates, at the Company's option, at the base rate (the higher of the federal funds rate plus 0.5% or prime rate) plus a margin of 2.0%, or at LIBOR plus a margin of 3.0% per annum. On April 6, 2012, the outstanding amounts owed of $115,371 were paid in full, and this term loan facility was extinguished.
Secured revolving credit and term loan facilities, Sweden
The secured credit facilities in Sweden include a U.S. dollar equivalent $25 million revolving credit facility and a U.S. dollar equivalent $25 million term loan, which both carry an interest rate of STIBOR plus 1.775%. The revolving credit facility matures August 30, 2013, and carries an automatic renewal provision as long as certain covenants are met. The term loan matures on August 30, 2014. These facilities are secured by the majority of assets of Elfa. The facilities are subject to two financial ratios: (1) consolidated Elfa equity ratio (calculated as total shareholders' equity divided into total assets) must exceed 35% at the end of each calendar month; and (2) consolidated Elfa ratio of net debt to EBITDA may not exceed 4.0 at the end of each calendar month. The Company was compliant with these ratios at March 2, 2013. Under the terms of the term loan facility, quarterly principal repayments of 6,250 Swedish krona (approximately $969 based on 2012 year-end rate of exchange from Swedish krona to U.S. dollar of 6.45) are required through August 2014.
Senior subordinated notes
On August 16, 2007, the Company entered into a Senior Subordinated Loan Agreement with entities led by TCW/Crescent Mezzanine Partners, L.P., which provided for a senior subordinated term loan of $150 million. Borrowings under the senior subordinated notes accrued interest at 11.0% per annum, payable semiannually in cash, unless the portion eligible for the PIK (paid in kind) option was invoked, whereby the interest rate was 11.5% (6.5% paid in cash and 5.0% paid in kind). On April 6, 2012, the
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outstanding amounts owed of $165,549 were paid in full and these senior subordinated notes were extinguished.
Secured revolving credit, U.S.
On April 6, 2012, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A. as Administrative Agent and Collateral Agent and Wells Fargo Bank, N.A. as Syndication Agent. The asset-based revolving credit facility provides commitments of up to $75 million for revolving loans and letters of credit. The total amount of availability under the facility is limited to the sum of (a) 90% of eligible credit card receivables and (b) 90% of the appraised value of eligible inventory; minus (c) certain availability reserves and (d) outstanding credit extensions including letters of credit and existing revolving loans. The lenders may, at their sole discretion, increase their commitments by up to $25 million upon such request from the Company.
Borrowings accrue interest, at the Company's option, at the base rate (the higher of the federal funds rate plus 0.5%, prime rate, or the one-month LIBOR rate plus 1%) plus a specified applicable margin per annum subject to a grid based on excess availability or at LIBOR plus a specified applicable margin per annum, also subject to a grid based on excess availability.
All obligations under the revolving credit facility are fully, unconditionally, and jointly and severally guaranteed by each of The Container Store Group, Inc. and our domestic subsidiaries. The revolving credit facility is secured by (a) a perfected first-priority security interest in all personal property of The Container Store, Inc. and the guarantors, consisting of inventory, accounts receivable, cash, deposit accounts, and other general intangibles, and (b) a perfected second-priority security interest in the term loan facility collateral described above. The revolver matures on April 6, 2017, and includes a letter of credit facility sub-limit of $20 million.
The credit facility includes restrictions on the Company's ability to incur additional liens and indebtedness, make investments and dispositions, pay dividends or make other distributions, make loans, prepay certain indebtedness and enter into sale and leaseback transactions, among other restrictions. The Company is required to maintain a consolidated fixed-charge coverage ratio of 1.0 to 1.0 if excess availability is less than $10 million at any time. The Company was compliant with this covenant at March 2, 2013.
There was $53,465 available under the credit facility as of March 2, 2013, based on the factors described above. Maximum borrowings, including letters of credit issued under the credit facility during the period ended March 2, 2013, were $17,793.
Deferred financing costs
The Company capitalizes certain costs associated with issuance of various debt instruments. These deferred financing costs are amortized to interest expense on a straight-line method, which is materially consistent with the effective interest method, over the terms of the related debt agreements. The Company capitalized $9,467 of fees associated with the new $275 million Secured Term Loan facility that will be amortized through April 6, 2019, as well as $375 of fees associated with the Secured Revolving facility that will be amortized through April 6, 2017. Amortization expense of deferred financing costs was $1,462 in
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fiscal 2012, and $1,276 in fiscal 2011 and fiscal 2010. The following is a schedule of amortization expense of deferred financing costs:
2013 |
$ | 1,479 | ||
2014 |
1,479 | |||
2015 |
1,479 | |||
2016 |
1,479 | |||
2017 |
1,363 | |||
Thereafter |
1,466 | |||
|
$ | 8,745 | ||
Restrictive covenants
The secured term loans and credit facility contain a number of covenants that, among other things, restrict the Company's ability, subject to specified exceptions, to incur additional debt; incur additional liens and contingent liabilities; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve itself; engage in businesses that are not in a related line of business; make loans, advances or guarantees; engage in transactions with affiliates; and make investments. In addition, the financing agreements contain certain cross-default provisions. As of March 2, 2013, the Company is in compliance with all covenants and no Event of Default (as such term is defined in the agreements) has occurred.
6. Income taxes
Components of the (benefit) provision for income taxes are as follows:
|
Year ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
March 2 2013 |
February 25 2012 |
February 26 2011 |
|||||||
(Loss) income before income taxes: |
||||||||||
U.S. |
$ | 12,374 | $ | (15,484 | ) | $ | (46,801 | ) | ||
Foreign |
(16,953 | ) | (16,561 | ) | 5,877 | |||||
|
$ | (4,579 | ) | $ | (32,045 | ) | $ | (40,924 | ) | |
Federal income taxes: |
||||||||||
Current |
$ | 1,630 | $ | 89 | $ | 269 | ||||
Deferred |
459 | 499 | 1,220 | |||||||
|
2,089 | 588 | 1,489 | |||||||
State income and franchise taxes: |
||||||||||
Current |
644 | 672 | 460 | |||||||
Deferred |
215 | 251 | 256 | |||||||
|
859 | 923 | 716 | |||||||
Foreign income taxes: |
||||||||||
Current |
1,183 | 1,261 | 1,844 | |||||||
Deferred |
(8,580 | ) | (4,146 | ) | 80 | |||||
|
(7,397 | ) | (2,885 | ) | 1,924 | |||||
Total (benefit) provision for income taxes |
$ | (4,449 | ) | $ | (1,374 | ) | $ | 4,129 | ||
F-20
The differences between the actual (benefit) provision for income taxes and the amounts computed by applying the statutory federal tax rate to income before taxes are as follows:
|
Year ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
March 2 2013 |
February 25 2012 |
February 26 2011 |
|||||||
Benefit computed at federal statutory rate |
$ | (1,603 | ) | $ | (11,216 | ) | $ | (14,323 | ) | |
Impairment of nondeductible goodwill |
| 12,730 | 18,190 | |||||||
Permanent differences |
1,387 | 40 | 33 | |||||||
Change in valuation allowance |
(2,569 | ) | (3,493 | ) | (1,532 | ) | ||||
State income taxes, net of federal benefit |
973 | (1,069 | ) | 769 | ||||||
Residual effect of intra-period tax allocation |
| 115 | 951 | |||||||
Effect of foreign income taxes |
1,181 | 1,437 | (23 | ) | ||||||
Change in Swedish tax rate |
(2,936 | ) | | | ||||||
Economic Zone Credits |
(806 | ) | | | ||||||
Change in state deferred tax calculation |
| | 240 | |||||||
Other |
(76 | ) | 82 | (176 | ) | |||||
|
$ | (4,449 | ) | $ | (1,374 | ) | $ | 4,129 | ||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of deferred tax assets and liabilities as of March 2, 2013 and February 25, 2012, are as follows:
|
March 2 2013 |
February 25 2012 |
|||||
---|---|---|---|---|---|---|---|
Deferred tax assets: |
|||||||
Inventory |
$ | 2,154 | $ | 1,697 | |||
Loss and credit carryforwards |
4,133 | 8,169 | |||||
Pension liability adjustment |
274 | 224 | |||||
Accrued liabilities |
1,462 | 1,295 | |||||
Subtotal |
8,023 | 11,385 | |||||
Valuation allowance |
(4,684 | ) | (7,051 | ) | |||
Total deferred tax assets |
3,339 | 4,334 | |||||
Deferred tax liabilities: |
|||||||
Intangibles |
(85,848 | ) | (91,543 | ) | |||
Financial instruments |
(434 | ) | (650 | ) | |||
Capital assets |
(3,322 | ) | (6,083 | ) | |||
Total deferred tax liabilities |
(89,604 | ) | (98,276 | ) | |||
Net deferred tax liabilities |
$ | (86,265 | ) | $ | (93,942 | ) | |
A valuation allowance has been established in the Company's domestic operations because as of March 2, 2013, it does not appear more likely than not that deferred tax assets in excess of reversing deferred tax liabilities will be realized.
The Company has foreign tax credits of approximately $1,331 that expire in 2019. While the Company is not currently under IRS audit, tax years ended March 1, 2008, and through the current year remain open.
F-21
The Company accounts for the repatriation of foreign earnings in accordance with ASC 740-30. As such, the Company is partially reinvested based on the guidance provided in ASC 740-30.
The Company adopted the provisions of ASC 740 during 2009. ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The cumulative effect of adopting ASC 740-10 resulted in no adjustment to the consolidated financial statements. Furthermore, there have been no adjustments to the consolidated financial statements under ASC 740-10 since adoption.
7. Employee benefit plans
401(k) Plan
All employees of the Company who complete 11 months of service are eligible to participate in the Company's 401(k) Plan. Participants may contribute up to 80% of annual compensation, limited to $17,000 annually ($22,500 for participants aged 50 years and over) as of January 1, 2012. In fiscal 2012 and fiscal 2011, the Company matched 50% of employee contributions up to 4% of compensation. The Company suspended the 401(k) match program for fiscal 2010 only. The amount charged to expense for the Company's matching contribution was $997, $769, and $-0- for the fiscal years ended March 2, 2013, February 25, 2012, and February 26, 2011, respectively.
Nonqualified retirement plan
The Company has a nonqualified retirement plan whereby certain employees can elect to defer a portion of their compensation into retirement savings accounts. Under the plan, there is no requirement that the Company match contributions, although the Company may contribute matching payments at its sole discretion. No matching contributions were made to the plan during any of the periods presented. The total fair market value of the plan asset recorded in prepaid and other current assets in fiscal 2012 and fiscal 2011 was $2,569 and $2,133, respectively, and the total fair value of the plan liability recorded in accrued liabilities in fiscal 2012 and fiscal 2011 was $2,582 and $2,139, respectively.
Pension plan
The Company provides pension benefits to the employees of Elfa under collectively bargained pension plans in Sweden, which are recorded in other long-term liabilities. The defined benefit plan provides benefits for participating employees based on years of service and final salary levels at retirement. Certain employees also participate in defined contribution plans for which Company contributions are determined as a percentage of participant compensation. The defined benefit plans are unfunded and approximately 2% of Elfa employees are participants in the defined benefit pension plan.
F-22
The following is a reconciliation of the changes in the defined benefit obligations, a statement of funded status, and the related weighted-average assumptions:
|
March 2 2013 |
February 25 2012 |
|||||
---|---|---|---|---|---|---|---|
Change in benefit obligation: |
|||||||
Projected benefit obligation, beginning of year |
$ | 3,180 | $ | 2,958 | |||
Service cost |
58 | 55 | |||||
Interest cost |
121 | 129 | |||||
Benefits paid |
(104 | ) | (89 | ) | |||
Actuarial loss |
381 | 239 | |||||
Exchange rate (gain) loss |
85 | (112 | ) | ||||
Projected benefit obligation, end of year |
3,721 | 3,180 | |||||
Fair value of plan assets, end of year |
| | |||||
Underfunded status, end of year |
$ | (3,721 | ) | $ | (3,180 | ) | |
Discount rate |
3.9% | 4.5% | |||||
Rate of pay increases |
3.0% | 3.0% | |||||
The following table provides the components of net periodic benefit cost for fiscal years 2012, 2011, and 2010:
|
Year ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
March 2 2013 |
February 25 2012 |
February 26 2011 |
|||||||
Components of net periodic benefit cost: |
||||||||||
Defined benefit plans: |
||||||||||
Service cost |
$ | 58 | $ | 55 | $ | 48 | ||||
Interest cost |
121 | 129 | 111 | |||||||
Amortization of unrecognized net loss |
21 | 3 | | |||||||
Net periodic benefit cost for defined benefit plan |
200 | 187 | 159 | |||||||
Defined contribution plans |
2,834 | 2,809 | 2,127 | |||||||
Total net periodic benefit cost |
$ | 3,034 | $ | 2,996 | $ | 2,286 | ||||
8. Stock-based compensation
In fiscal 2012, the Company implemented the 2012 Stock Option Plan of The Container Store Group, Inc. (the Plan). The Plan provides for grants of nonqualified stock options and incentive stock options. 61,842 shares have been reserved for issuance under the Plan. As of March 2, 2013, there were approximately 20,327 shares available for future grant. Awards may be granted under the Plan to employees, consultants, and non-employee Board members of the Company or any parent or subsidiary. All grants of option awards made under the Plan have a maximum term of 10 years. Incentive stock options may be issued to 10% stockholders, however, these awards have a maximum term of five years. The exercise price of these option awards is not less than 100% of the fair market value of our stock on the grant date or not less than 110% of such fair market value for an incentive stock option granted to a 10% stockholder. The fair market value of the company's common stock at the date of the grant was determined by the Company's Board of Directors. The option awards vest ratably and are exercisable over a five year requisite service period.
F-23
The following table summarizes the Company's stock option activity during fiscal 2012:
|
Shares |
Weighted- average exercise price |
Weighted- average contractual term remaining |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Balance at February 25, 2012: |
| | | |||||||
Granted |
41,740 | $ | 100.00 | | ||||||
Exercised |
| | | |||||||
Canceled |
(225 | ) | $ | 100.00 | | |||||
Balance at March 2, 2013 |
41,515 | $ | 100.00 | 9.31 | ||||||
The fair value of stock options is estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
The weighted-average assumptions used in fiscal 2012 were as follows:
Expected term |
6.5 years | |||
Expected volatility |
51.54% | |||
Risk-free interest rate |
1.01% | |||
Dividend yield |
0% | |||
During fiscal 2012, the Company recognized total stock-based compensation expense, as a component of selling, general and administrative expenses, of $283. As of March 2, 2013, there was a remaining unamortized expense balance of $1,746 (net of estimated forfeitures), which the Company expects to be recognized on a straight-line basis over an average remaining service period of approximately 4.3 years.
F-24
9. Stockholder's equity
Common stock
On August 16, 2007, the Company issued 500,356 shares of common stock with a par value of $0.01 per share at a price of $100 per share. The holders of common stock are entitled to one vote per common share. The holders have no preemptive or other subscription rights and there are no redemptions or sinking fund provisions with respect to such shares. Common stock is subordinate to the preferred stock with respect to rights upon liquidation and dissolution of the Company.
Preferred Stock
On August 16, 2007, the Company issued 202,480 shares each of 12% Senior Cumulative Preferred Stock (Senior) and 12% Junior Cumulative Preferred Stock (Junior), each with a par value of $0.01 per share with a liquidation preference of $1,000 per share as of the date of issuance. The holders of the outstanding series of Senior and Junior Preferred Stock shall be entitled to receive quarterly distributions in the form of cash dividends on each share of Senior and Junior Preferred Stock, at a rate per annum equal to 12% of the liquidation preference. Dividends shall accrue on a daily basis from the preferred stock issue date and are cumulative from such date, regardless of whether the Company has earnings or profits, there are funds legally available for the payment of such dividends, the Company has sufficient cash, or whether dividends are declared. Accumulated unpaid dividends in respect of each dividend period will accrue dividends from the applicable dividend payment date, payable quarterly, at a rate per annum equal to 12% of the amount of such accumulated unpaid dividends. Dividends shall be payable when, as, and if declared by the Board of Directors, quarterly in arrears on each dividend payment date. Dividends payable on shares of the Senior and Junior Preferred Stock for any year shall be computed on the basis of a 360-day year of 12 30-day months. There were $382,847 and $292,497 cumulative preferred share dividends in arrears as of March 2, 2013 and February 25, 2012, respectively. These dividends have not been declared by the Board of Directors and, therefore, have not been accrued on the accompanying consolidated balance sheets. See Note 16 for a discussion of the declaration and payment of a dividend distribution from the Company to holders of Senior Cumulative Preferred Stock in the amount of $90.0 million.
Subject to the priority of any senior securities, upon any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Company, the holders of shares of Senior and Junior Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders: (i) $1,000 per share of Senior Preferred Stock plus (ii) an amount equal to (A) all accumulated and unpaid dividends in respect of the Senior and Junior Preferred Stock, plus (B) dividends accrued on accumulated unpaid dividends plus (C) any accrued dividends for the current dividend period and the amounts described in clauses (i) and (ii) (collectively, the "liquidation preference") before any payment shall be made or any assets distributed to the holders of any junior securities, including the common stock of the Company. Upon the closing of an initial public offering, immediately following the payment of (i)and (ii) above, the Company will exchange each outstanding share of preferred stock by the initial public offering price of a share of the Company's common stock in the offering, net of the underwriting discount and a pro rata portion, based upon the number of shares being sold in the offering, of the estimated offering-related expenses incurred by the Company.
Neither the Senior nor Junior Preferred Stock have voting rights, except: (a) as required by Delaware and other applicable law and (b) that holders of a majority of the outstanding shares of the particular class of Preferred Stock, voting as a separate class, will have the right to approve (i) each issuance by the Company of any (A) securities that rank senior to the particular class of Preferred Stock as to dividends or distributions upon a liquidation, or (B) securities that rank on a parity with the particular class of Preferred
F-25
Stock as to dividends or distributions upon a liquidation and (ii) any amendment of the Company's articles of incorporation, which (A) adversely affects any of the preferences or powers of the particular class of Preferred Stock or (B) authorizes the issuance of additional shares of the particular class of Preferred Stock.
10. Leases
The Company conducts all of its U.S. operations from leased facilities that include a corporate headquarters/warehouse facility and 58 store locations. The corporate headquarters/warehouse and stores are under operating leases that will expire over the next 1 to 20 years. The Company also leases computer hardware under operating leases that expire over the next few years. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases.
Most of the operating leases for the stores contain a renewal option at predetermined rental payments for periods of 5 to 20 years. This option enables the Company to retain use of facilities in desirable operating areas. The rental payments under certain store leases are based on a minimum rental plus a percentage of the sales in excess of a stipulated amount. These payments are accounted for as contingent rent and expensed when incurred.
The following is a schedule of future minimum lease payments due under noncancelable operating leases:
2013 |
$ | 62,521 | ||
2014 |
62,409 | |||
2015 |
61,121 | |||
2016 |
56,379 | |||
2017 |
53,403 | |||
Thereafter |
174,603 | |||
|
$ | 470,436 | ||
Rent expense for fiscal years 2012, 2011, and 2010, was $63,899, $58,190, and $54,905, respectively. Included in rent expense is percentage-of-sales rent expense of $344, $269, and $172 for fiscal years 2012, 2011, and 2010, respectively.
11. Commitments and contingencies
In connection with insurance policies, the Company has outstanding standby letters of credit totaling $2,793 as of March 2, 2013.
The Company is subject to ordinary litigation and routine reviews by regulatory bodies that are incidental to its business, none of which is expected to have a material adverse effect on the Company's financial condition, results of operations, or cash flows.
12. Financial hedge instruments
Foreign currency forward contracts
The Company's international operations and purchases of its significant product lines from foreign suppliers are subject to certain opportunities and risks, including foreign currency fluctuations. The Company utilizes foreign currency forward exchange contracts in Swedish krona to stabilize its retail gross margins and to protect its domestic operations from downward currency exposure by hedging purchases of inventory from
F-26
its wholly owned subsidiary, Elfa. In fiscal 2012 and fiscal 2011, the Company used forward contracts for 85% and 77% of inventory purchases in Swedish krona each year, respectively. All of the Company's currency-related hedge instruments have terms from 1 to 12 months and require the Company to exchange currencies at agreed-upon rates at settlement. The counterparties to the contracts consist of a limited number of major domestic and international financial institutions. The Company does not hold or enter into financial instruments for trading or speculative purposes. The Company records its financial hedge instruments on a gross basis and generally does not require collateral from these counterparties because it does not expect any losses from credit exposure. The Company does not have any material financial hedge instruments that do not qualify for hedge accounting treatment as of March 2, 2013 and February 25, 2012. The Company records all foreign currency forward contracts on its consolidated balance sheet at fair value. Forward contracts not designated as hedges are adjusted to fair value through income. The Company accounts for its foreign currency hedge instruments as cash flow hedges, as defined. Changes in the fair value of the foreign currency hedge instruments that are considered to be effective, as defined, are recorded in other comprehensive income (loss) until the hedged item (inventory) is sold to the customer, at which time the deferred gain or loss is recognized through cost of sales. Any portion of a change in the foreign currency hedge instrument's fair value that is considered to be ineffective, as defined, or that the Company has elected to exclude from its measurement of effectiveness, is immediately recorded in earnings as cost of sales. The Company recorded the fair value of its unsettled foreign currency forward contracts as cash flow hedges, resulting in a $1,103 and a $1,656 total current asset in the accompanying consolidated balance sheets as of March 2, 2013 and February 25, 2012, respectively.
The change in fair value of the Company's foreign currency forward contracts that qualify as cash flow hedges and included in accumulated other comprehensive income (loss), net of taxes, is presented as follows:
|
March 2 2013 |
February 25 2012 |
|||||
---|---|---|---|---|---|---|---|
Balance at beginning of period |
$ | 1,649 | $ | 2,577 | |||
Changes in fair value, net of tax |
777 | 490 | |||||
Release of residual tax effect in other comprehensive income |
| 115 | |||||
Reclassification to earnings, net of tax |
(881 | ) | (1,533 | ) | |||
Balance at end of period |
$ | 1,545 | $ | 1,649 | |||
Of the $1,545 in accumulated other comprehensive gain recorded at March 2, 2013, $440 represents unrealized gains that have been recorded for settled forward contracts related to inventory on hand as of March 2, 2013. The Company expects the unrealized gain of $440, net of taxes, to be reclassified into earnings over the next 12 months as the underlying inventory is sold to the end customer.
13. Fair value measurements
Under generally accepted accounting principles, the Company is required to a) measure certain assets and liabilities at fair value or b) disclose the fair values of certain assets and liabilities recorded at cost. Accounting standards define fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. Fair value is calculated assuming the transaction occurs in the principal or most advantageous market for the asset or liability and includes consideration of non-performance risk and credit risk of both parties.
F-27
Accounting standards pertaining to fair value establish a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value. These tiers include:
As of March 2, 2013 and February 25, 2012, the Company held certain items that are required to be measured at fair value on a recurring basis. These included cash and cash equivalents, the nonqualified retirement plan, and foreign currency forward contracts. Cash and cash equivalents consist of cash on hand and short-term, highly liquid investments, all of which have maturities of 90 days or less. The nonqualified retirement plan consists of investments purchased by employee contributions to retirement savings accounts. Foreign currency forward contracts are related to the Company's attempts to hedge foreign currency fluctuation on purchases of inventory in Swedish krona. The Company's foreign currency hedge instruments consist of over-the-counter (OTC) contracts, which are not traded on a public exchange. See Note 12 for further information on the Company's hedging activities.
The fair values of the nonqualified retirement plan and foreign currency forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, the Company has categorized these items as Level 2. The Company also considers counterparty credit risk and its own credit risk in its determination of all estimated fair values. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of contracts it holds.
The following items are measured at fair value on a recurring basis, subject to the disclosure requirements of ASC 820 at March 2, 2013 and February 25, 2012:
Description |
|
March 2 2013 |
February 25 2012 |
||||||
---|---|---|---|---|---|---|---|---|---|
Assets |
|||||||||
Cash and cash equivalents |
Level 1 | $ | 25,351 | $ | 51,163 | ||||
Nonqualified retirement plan |
Level 2 | 2,569 | 2,133 | ||||||
Foreign currency hedge instruments |
Level 2 | 1,103 | 1,656 | ||||||
Total assets |
$ | 29,023 | $ | 54,952 | |||||
Liabilities |
|||||||||
Nonqualified retirement plan |
Level 2 | $ | 2,582 | $ | 2,139 | ||||
Also, as of March 2, 2013, the Company held certain items that are required to be measured at fair value on a nonrecurring basis. These included goodwill and trade names. See Notes 1 and 2 for more information
F-28
regarding the fair value valuation methodologies of these items. As a result of performing these calculations on an income approach, these values are classified as Level 3 on the fair value hierarchy.
The fair values of long-term debt were estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements (Level 3 valuations). As of March 2, 2013, the carrying values and estimated fair values of the Company's long-term debt, including current maturities, were:
|
March 2 2013 | ||||||
---|---|---|---|---|---|---|---|
|
Carrying value |
Fair value |
|||||
Secured term loan, U.S. ($275 million) |
$ | 272,938 | $ | 261,718 | |||
Secured term loan, Sweden |
5,812 | 5,864 | |||||
Other loans |
6,621 | 6,675 | |||||
|
$ | 285,371 | $ | 274,257 | |||
|
February 25 2012 | ||||||
---|---|---|---|---|---|---|---|
|
Carrying value |
Fair value |
|||||
Secured term loan, U.S. ($125 million) |
$ | 115,684 | $ | 125,030 | |||
Secured term loan, Sweden |
9,492 | 9,492 | |||||
Senior subordinated notes |
165,549 | 165,549 | |||||
Other loans |
9,441 | 9,441 | |||||
|
$ | 300,166 | $ | 309,512 | |||
14. Segment reporting
The Company's reportable segments were determined on the same basis as how it evaluates the performance internally. The Company's two reportable segments consist of TCS and Elfa. The TCS segment includes the Company's retail stores, website and call center, as well as the installation services business that was acquired in fiscal 2011. These operating segments have been aggregated into a single reportable segment based on the similar customer base that they share, the merchandise offered is largely the same, and also because they are closely integrated logistically and operationally.
The Elfa segment includes the manufacturing business that produces the elfa® brand products that are sold domestically, exclusively through the TCS segment, as well as throughout Europe. The intersegment sales in the Elfa column represent elfa® product sales to the TCS segment. These sales and the related gross margin on product recorded in TCS inventory balances at the end of the period are eliminated for consolidation purposes in the Corporate/Other column. The net sales to external customers in the Elfa column represent sales to customers outside of the United States.
Amounts in the Corporate/Other column include unallocated corporate expenses and assets, intersegment eliminations and other adjustments to segment results necessary for the presentation of consolidated financial results in accordance with generally accepted accounting principles.
In general, the Company uses the same measurements to calculate earnings or loss before income taxes for reportable segments as it does for the consolidated company. However, interest expense related to the
F-29
domestic secured term loan and revolver and senior subordinated notes is recorded in the Corporate/Other column.
Fiscal year 2012 |
TCS |
Elfa |
Corporate/ Other |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales to external customers |
$ | 613,252 | $ | 93,505 | $ | | $ | 706,757 | |||||
Intersegment sales |
| 47,606 | (47,606 | ) | | ||||||||
Interest expense, net |
116 | 932 | 20,340 | 21,388 | |||||||||
Earnings (loss) before income taxes(1) |
47,403 | (16,953 | ) | (35,029 | ) | (4,579 | ) | ||||||
Capital expenditures(2) |
28,132 | 7,838 | 12,589 | 48,559 | |||||||||
Depreciation and amortization |
15,971 | 6,768 | 6,811 | 29,550 | |||||||||
Goodwill |
202,815 | | | 202,815 | |||||||||
Trade names |
187,048 | 54,892 | | 241,940 | |||||||||
Assets(2) |
587,212 | 142,731 | 22,877 | 752,820 | |||||||||
Fiscal year 2011 |
TCS |
Elfa |
Corporate/ Other |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales to external customers |
$ | 530,909 | $ | 102,710 | $ | | $ | 633,619 | |||||
Intersegment sales |
| 41,643 | (41,643 | ) | | ||||||||
Interest expense, net |
21 | 1,139 | 24,257 | 25,417 | |||||||||
Earnings (loss) before income taxes(1) |
42,397 | (44,035 | ) | (30,407 | ) | (32,045 | ) | ||||||
Capital expenditures(2) |
20,986 | 14,008 | 6,226 | 41,220 | |||||||||
Depreciation and amortization |
14,979 | 6,434 | 6,038 | 27,451 | |||||||||
Goodwill |
202,815 | | | 202,815 | |||||||||
Trade names |
187,048 | 68,828 | | 255,876 | |||||||||
Assets(2) |
569,849 | 157,821 | 19,008 | 746,678 | |||||||||
Fiscal year 2010 |
TCS |
Elfa |
Corporate/ Other |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net sales to external customers |
$ | 472,333 | $ | 96,487 | $ | | $ | 568,820 | |||||
Intersegment sales |
| 35,189 | (35,189 | ) | | ||||||||
Interest expense, net |
| 825 | 25,181 | 26,006 | |||||||||
Earnings (loss) before income taxes(1) |
36,571 | (46,094 | ) | (31,401 | ) | (40,924 | ) | ||||||
Capital expenditures(2) |
8,001 | 6,921 | 3,253 | 18,175 | |||||||||
Depreciation and amortization |
14,007 | 4,686 | 5,661 | 24,354 | |||||||||
Goodwill |
196,615 | 30,888 | | 227,503 | |||||||||
Trade names |
187,048 | 87,796 | | 274,844 | |||||||||
Assets(2) |
544,700 | 208,926 | 19,677 | 773,303 | |||||||||
(1) The Elfa segment includes impairment charges of $15,533, $15,584, and $417 in fiscal 2012, fiscal 2011, and fiscal 2010, respectively, for trade names, as well as $0, $31,453, and $51,971 in fiscal 2012, fiscal 2011, and fiscal 2010, respectively, for goodwill. The Corporate/Other column includes $7,333 loss on extinguishment of debt in fiscal 2012.
(2) Tangible assets and trade names in the Elfa column are located outside of the United States. Assets and capital expenditures in Corporate/Other include assets located in the corporate headquarters and distribution center. Assets in Corporate/Other also include deferred tax assets and the fair value of forward contracts.
F-30
The following table shows sales by merchandise category as a percentage of total net sales for fiscal years 2012, 2011, and 2010:
|
Fiscal year 2012 |
Fiscal year 2011 |
Fiscal year 2010 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
elfa®(1) |
33% | 36% | 37% | |||||||
Closet, Bath, Travel, Laundry |
20% | 20% | 20% | |||||||
Storage, Box, Shelving |
13% | 13% | 12% | |||||||
Kitchen, Food Storage, Trash |
13% | 12% | 12% | |||||||
Office, Collections, Hooks |
10% | 9% | 9% | |||||||
Containers, Gift Packaging, Seasonal, Impulse |
9% | 8% | 8% | |||||||
Services & Other |
2% | 1% | 1% | |||||||
Total |
100% | 100% | 100% | |||||||
(1) Includes Elfa segment sales to external customers
15. Net income (loss) per common share
Basic net income (loss) per common share is computed as net income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Net income (loss) available to common shareholders is computed as net income (loss) less undeclared, unpaid dividends to preferred shareholders for the period.
The following is a reconciliation of net income (loss) available to common shareholders and the number of shares used in the basic and diluted net loss per share calculations:
|
Year ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
(In thousands, except share and per share amounts) |
March 2 2013 |
February 25 2012 |
February 26 2011 |
|||||||
Net loss |
$ | (130 | ) | $ | (30,671 | ) | $ | (45,053 | ) | |
Less: Unpaid dividends accumulated to preferred shareholders |
(90,349 | ) | (78,575 | ) | (69,723 | ) | ||||
Net loss available to common shareholders |
$ | (90,479 | ) | $ | (109,246 | ) | $ | (114,776 | ) | |
Divided by: Weighted Average Shares |
498,225 | 498,600 | 498,905 | |||||||
Net loss per share |
$ | (181.60 | ) | $ | (219.10 | ) | $ | (230.05 | ) | |
16. Subsequent events
The Company has evaluated subsequent events through July 12, 2013, which is the date the financial statements were available to be issued.
On April 8, 2013, the Company executed an amendment to the Credit Agreement entered into on April 6, 2012, which provided for a term loan facility in the amount of $275 million. Under this amendment, borrowings under the term loan facility were increased to $362.3 million. Borrowings under the secured term loan accrue interest at a new lower rate of LIBOR plus 4.25%, subject to a LIBOR floor of 1.25%, and the maturity date remains at April 6, 2019. Additionally, the amendment eliminated the senior secured leverage ratio discussed in Note 5.
F-31
The additional $90.0 million of funding was used to finance a dividend distribution from The Container Store, Inc. to its sole stockholder, The Container Store Group, Inc. (formerly known as TCS Holdings, Inc.), on April 8, 2013. The Container Store Group, Inc. then immediately declared a cash dividend to holders of the Company's Senior Cumulative Preferred Stock in the amount of $90.0 million, which was paid on April 9, 2013. See Note 9 for details of undeclared dividends on the Senior Cumulative Preferred Stock.
The Company plans to confidentially submit a Form S-1 registration statement under the Securities Act of 1933 on July 12, 2013 in an initial public offering of shares of its common stock. Upon closing of the offering, the ownership interest of holders of common stock will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of common stock after the offering, after giving effect to the exchange of all outstanding shares of our preferred stock.
F-32
The Container Store Group, Inc.
Consolidated balance sheets (unaudited)
(In thousands, except share amounts) |
June 1 2013 |
March 2 2013 |
May 26 2012 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Assets |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 13,703 | $ | 25,351 | $ | 17,565 | ||||
Accounts receivable, net |
23,087 | 25,536 | 17,749 | |||||||
Inventory |
91,150 | 82,443 | 78,850 | |||||||
Prepaid expenses and other current assets |
17,005 | 21,284 | 16,738 | |||||||
Forward contracts |
329 | 1,103 | | |||||||
Deferred tax assets, net |
1,505 | 1,505 | 1,203 | |||||||
Total current assets |
146,779 | 157,222 | 132,105 | |||||||
Noncurrent assets: |
||||||||||
Property and equipment, net |
141,402 | 141,177 | 122,312 | |||||||
Goodwill |
202,815 | 202,815 | 202,815 | |||||||
Trade names |
240,528 | 241,940 | 249,423 | |||||||
Deferred financing costs, net |
10,633 | 8,745 | 9,854 | |||||||
Other assets |
880 | 921 | 939 | |||||||
Total noncurrent assets |
596,258 | 595,598 | 585,343 | |||||||
Total assets |
$ | 743,037 | $ | 752,820 | $ | 717,448 | ||||
See accompanying notes.
F-33
The Container Store Group, Inc.
Consolidated balance sheets (unaudited) (continued)
(In thousands, except share amounts) |
June 1 2013 |
March 2 2013 |
May 26 2012 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Liabilities and shareholders' equity |
||||||||||
Current liabilities: |
||||||||||
Accounts payable |
$ | 50,495 | $ | 54,334 | $ | 44,843 | ||||
Accrued liabilities |
51,232 | 52,330 | 42,555 | |||||||
Forward contracts |
| | 548 | |||||||
Income taxes payable |
379 | 2,650 | 235 | |||||||
Revolving lines of credit |
18,178 | 13,482 | 16,007 | |||||||
Current portion of long-term debt |
9,769 | 9,023 | 8,673 | |||||||
Total current liabilities |
130,053 | 131,819 | 112,861 | |||||||
Noncurrent liabilities: |
||||||||||
Long-term debt |
368,102 | 276,348 | 282,605 | |||||||
Deferred tax liabilities, net |
85,725 | 87,770 | 90,137 | |||||||
Deferred rent and other long-term liabilities |
23,883 | 23,508 | 20,703 | |||||||
Total noncurrent liabilities |
477,710 | 387,626 | 393,445 | |||||||
Total liabilities |
607,763 | 519,445 | 506,306 | |||||||
Commitments and contingencies (Note 7) |
||||||||||
Shareholders' equity: |
||||||||||
Common stock, $0.01 par value, 600,000 shares authorized; 500,356 shares issued; 498,169, 498,169, and 498,308 shares outstanding as of June 1, 2013, March 2, 2013, and May 26, 2012, respectively |
5 | 5 | 5 | |||||||
Preferred stock, $0.01 par value, 500,000 shares authorized: |
||||||||||
Senior cumulative; 250,000 shares authorized; 202,480 shares issued; 202,196, 202,196, and 202,236 shares outstanding as of June 1, 2013, March 2, 2013, and May 26, 2012, respectively |
2 | 2 | 2 | |||||||
Junior cumulative; 250,000 shares authorized; 202,480 shares issued; 202,196, 202,196, and 202,236 shares outstanding as of June 1, 2013, March 2, 2013, and May 26, 2012, respectively |
2 | 2 | 2 | |||||||
Additional paid-in capital |
455,370 | 455,270 | 454,988 | |||||||
Accumulated other comprehensive income (loss) |
(158 | ) | 2,713 | (7,498 | ) | |||||
Retained deficit |
(319,160 | ) | (223,830 | ) | (235,664 | ) | ||||
Treasury stock, 2,755, 2,755 , and 2,536 shares as of June 1, 2013, March 2, 2013, and May 26, 2012, respectively |
(787 | ) | (787 | ) | (693 | ) | ||||
Total shareholders' equity |
135,274 | 233,375 | 211,142 | |||||||
Total liabilities and shareholders' equity |
$ | 743,037 | $ | 752,820 | $ | 717,448 | ||||
See accompanying notes.
F-34
The Container Store Group, Inc.
Consolidated statements of operations (unaudited)
|
Quarter ended | ||||||
---|---|---|---|---|---|---|---|
(In thousands, except share and per share amounts) |
June 1 2013 |
May 26 2012 |
|||||
Net sales |
$ | 159,645 | $ | 145,755 | |||
Cost of sales (excluding depreciation and amortization) |
66,441 |
61,578 |
|||||
Gross profit |
93,204 | 84,177 | |||||
Selling, general, and administrative expenses (excluding depreciation and amortization) |
83,807 |
76,500 |
|||||
Pre-opening costs |
1,962 | 1,661 | |||||
Depreciation and amortization |
7,470 | 7,254 | |||||
Restructuring charges |
241 | 494 | |||||
Other expenses |
219 | 247 | |||||
Loss on disposal of assets |
22 | 111 | |||||
Loss from operations |
(517 | ) | (2,090 | ) | |||
Interest expense |
5,555 | 5,798 | |||||
Loss on extinguishment of debt |
1,101 | 7,236 | |||||
Loss before taxes |
(7,173 | ) | (15,124 | ) | |||
Benefit for income taxes |
(1,844 | ) | (3,160 | ) | |||
Net loss |
$ | (5,329 | ) | $ | (11,964 | ) | |
Less: Unpaid dividends accumulated to preferred shareholders |
(22,298 | ) | (21,156 | ) | |||
Net loss available to common shareholders |
$ | (27,627 | ) | $ | (33,120 | ) | |
Basic and diluted net loss per common share |
$ | (55.46 | ) | $ | (66.44 | ) | |
Shares used in determination of net loss per share: |
|||||||
Basic and diluted |
498,169 | 498,472 | |||||
See accompanying notes.
F-35
The Container Store Group, Inc.
Consolidated statements of comprehensive loss (unaudited)
|
Quarter ended | ||||||
---|---|---|---|---|---|---|---|
(In thousands) |
June 1 2013 |
May 26 2012 |
|||||
Net loss |
$ | (5,329 | ) | $ | (11,964 | ) | |
Other comprehensive loss, net of tax: |
|||||||
Foreign currency translation adjustment |
(1,926 | ) | (7,747 | ) | |||
Unrealized loss on foreign currency forward contracts, net of taxes of $111 and $(98) |
(945 | ) | (2,053 | ) | |||
Comprehensive loss |
$ | (8,200 | ) | $ | (21,764 | ) | |
See accompanying notes.
F-36
The Container Store Group, Inc.
Consolidated statements of cash flows (unaudited)
|
Quarter ended | ||||||
---|---|---|---|---|---|---|---|
(In thousands) |
June 1 2013 |
May 26 2012 |
|||||
Operating activities |
|||||||
Net loss |
$ | (5,329 | ) | $ | (11,964 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: |
|||||||
Depreciation and amortization |
7,470 | 7,254 | |||||
Loss on disposal of property and equipment |
22 | 111 | |||||
Deferred tax benefit |
(1,616 | ) | (3,269 | ) | |||
Noncash interest |
434 | 353 | |||||
Noncash refinancing expense |
723 | 4,843 | |||||
Changes in operating assets and liabilities: |
|||||||
Accounts receivable |
2,090 | 1,517 | |||||
Inventory |
(9,524 | ) | (9,850 | ) | |||
Prepaid expenses and other assets |
4,581 | (2,807 | ) | ||||
Accounts payable and accrued liabilities |
(4,239 | ) | 3,891 | ||||
Taxes payable |
(2,632 | ) | (1,123 | ) | |||
Other noncurrent liabilities |
542 | 531 | |||||
Net cash used in operating activities |
(7,478 | ) | (10,513 | ) | |||
Investing activities |
|||||||
Additions to property and equipment |
(9,246 | ) | (11,247 | ) | |||
Proceeds from sale of property and equipment |
387 | | |||||
Net cash used in investing activities |
(8,859 | ) | (11,247 | ) | |||
Financing activities |
|||||||
Borrowings on revolving lines of credit |
21,334 | 20,789 | |||||
Payments on revolving lines of credit |
(11,205 | ) | (14,425 | ) | |||
Borrowings on long-term debt |
362,250 | 275,000 | |||||
Payments on long-term debt |
(274,453 | ) | (282,743 | ) | |||
Payment of debt issuance costs |
(3,046 | ) | (9,842 | ) | |||
Payment of dividends to preferred shareholders |
(90,000 | ) | | ||||
Purchase of treasury shares |
| (87 | ) | ||||
Net cash provided by (used in) financing activities |
4,880 | (11,308 | ) | ||||
Effect of exchange rate changes on cash |
(191 |
) |
(530 |
) |
|||
Net decrease in cash and cash equivalents |
(11,648 | ) | (33,598 | ) | |||
Cash and cash equivalents at beginning of fiscal year |
25,351 | 51,163 | |||||
Cash and cash equivalents at end of fiscal year |
$ | 13,703 | $ | 17,565 | |||
See accompanying notes.
F-37
The Container Store Group, Inc.
Notes to consolidated financial statements (unaudited)
(In thousands, except share amounts and unless otherwise stated)
June 1, 2013
1. Financial statementsbasis of presentation
These condensed financial statements include The Container Store Group, Inc. and its wholly owned subsidiaries (the Company). All intercompany transactions and balances have been eliminated in consolidation. The consolidated balance sheets as of June 1, 2013 and May 26, 2012, the consolidated statements of operations, the consolidated statements of comprehensive income, and the consolidated statements of cash flows for the thirteen weeks then ended have been prepared by the Company and are unaudited. In the opinion of management, the interim financial statements reflect all normal recurring adjustments necessary to present fairly the financial position at the balance sheet dates and the results of operations for the periods presented. The consolidated balance sheet as of March 2, 2013 has been derived from the audited consolidated balance sheet for the fiscal year then ended. The interim consolidated financial statements should be read together with the audited consolidated financial statements and related footnote disclosures included elsewhere in this prospectus.
The Company's business is moderately seasonal in nature and, therefore, the results of operations for the quarter ended June 1, 2013 are not necessarily indicative of the operating results of the full year. Demand is generally the highest in the fourth fiscal quarter due to our Annual elfa® Sale, and lowest in the first fiscal quarter.
The Company's fiscal year ends on the Saturday closest to February 28th. Like many other retailers, a 5-4-4 fiscal calendar is followed. All references to the first quarter of fiscal year 2013 relate to the thirteen weeks ended June 1, 2013. All references to the first quarter of fiscal year 2012 relate to the thirteen weeks ended May 26, 2012.
The functional currency of the Company's foreign operations is the applicable country's currency. The functional currency for the Company's wholly owned subsidiary, Elfa, is the Swedish krona. All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange. Revenues and expenses of foreign subsidiaries and affiliates are translated at weighted-average rates of exchange for the period. Realized gains and losses on purchases of inventory are included in cost of sales. All other realized gains and losses are included in selling, general, and administrative expenses in the consolidated statements of operations. Unrealized gains and losses are reported as cumulative translation adjustments through other comprehensive income (loss). The rates of exchange from Swedish krona to U.S. dollar were 6.6, 6.5, and 7.3 as of June 1, 2013, March 2, 2013, and May 26, 2013, respectively. The carrying amount of net assets related to Elfa and subject to currency fluctuation is $140,419, $142,840, and $146,182 as of June 1, 2013, March 2, 2013, and May 26, 2012, respectively.
The preparation of the Company's consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
F-38
New accounting pronouncements
On February 5, 2013, the FASB ratified ASU No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." The new disclosure requirements mandate that entities report, in one place, information about reclassifications out of Accumulated other comprehensive income (loss) ("AOCI"). The standard requires disclosure of the amount of the reclassification and the effect of the reclassification on the income statement line item. Upon adoption, the reclassification disclosures must be presented, in one place, either parenthetically on the face of the statement where net income is presented or in the notes. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012, and the Company adopted this ASU during the first quarter 2013. This ASU did not have a material effect on the Company's financial position or results of operations, but did change the Company's disclosure policies for amounts reclassified out of AOCI. The Company has elected to disclose the reclassification requirements in Note 9.
2. Long-term debt and revolving lines of credit
In April 2013, the Company executed an amendment to the Senior Secured Term Loan Facility. Under this amendment, borrowings under the term loan facility were increased to $362.3 million. Borrowings under the amended Senior Secured Term Loan Facility accrue interest at a new lower rate of LIBOR + 4.25%, subject to a LIBOR floor of 1.25% and the maturity date remains as April 6, 2019. Additionally, the amendment eliminated the senior secured leverage ratio requirement. The Company recorded expenses of $1,101 in the first quarter of 2013 associated with this repricing transaction. The amount consisted of $723 of deferred financing costs where accelerated amortization was required. Legal fees and other associated costs of $378 were also recorded. You may refer to Note 8 in these interim financial statements for a discussion of the $90.0 million dividend payment to senior preferred shareholders.
In April 2012, the Company's debt was refinanced, whereby a new $275 million Secured Term Loan was entered into, replacing the previously existing $125 million Secured Term Loan and $150 million Senior Subordinated Notes. The Company recorded expenses of $7,333 in fiscal 2012 associated with this refinancing transaction. This amount consisted of $1,655 million related to an early extinguishment fee on the Senior Subordinated Notes and $4,843 of deferred financing costs where accelerated amortization was required. We also recorded legal fees and other associated costs of $835. See below for more details regarding the new debt instruments. You may refer to Note 5 in the audited consolidated financial statements and related footnote disclosures included elsewhere in this prospectus for more information regarding the Company's indebtedness.
F-39
Long-term debt and revolving lines of credit consist of the following:
|
June 1 2013 |
March 2 2013 |
May 26 2012 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Secured term loan, U.S. ($275 million) |
$ | | $ | 272,938 | $ | 275,000 | ||||
Secured term loan, U.S. ($362 million) |
362,250 | | | |||||||
Secured term loan, Sweden |
4,719 | 5,812 | 7,742 | |||||||
Secured revolving credit, U.S. |
5,000 | | | |||||||
Mortgage and other loans |
5,902 | 6,621 | 8,536 | |||||||
|
377,871 | 285,371 | 291,278 | |||||||
Less current portion |
(9,769 | ) | (9,023 | ) | (8,673 | ) | ||||
|
$ | 368,102 | $ | 276,348 | $ | 282,605 | ||||
Secured revolving credit, Sweden |
$ | 18,178 | $ | 13,482 | $ | 16,007 | ||||
3. Inventory
The components of inventory are summarized below:
|
June 1 2013 |
March 2 2013 |
May 26 2012 |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Raw materials |
$ | 5,061 | $ | 5,657 | $ | 5,257 | ||||
Work-in-progress |
2,221 | 1,983 | 1,768 | |||||||
Finished goods |
83,868 | 74,803 | 71,825 | |||||||
|
$ | 91,150 | $ | 82,443 | $ | 78,850 | ||||
4. Net income (loss) per share
Basic net income (loss) per common share is computed as net income (loss) available to common shareholders divided by the weighted average number of common shares outstanding for the period. Net income (loss) available to common shareholders is computed as net income (loss) less undeclared, unpaid dividends to preferred shareholders for the period.
The following is a reconciliation of net income (loss) available to common shareholders and the number of shares used in the basic and diluted net loss per share calculations:
|
Quarter ended | ||||||
---|---|---|---|---|---|---|---|
In thousands, except share and per share amounts |
June 1 2013 |
May 26 2012 |
|||||
Net loss |
$ | (5,329 | ) | $ | (11,964 | ) | |
Less: Unpaid dividends accumulated to preferred shareholders |
(22,298 | ) | (21,156 | ) | |||
Net loss available to common shareholders |
$ | (27,627 | ) | $ | (33,120 | ) | |
Divided by: Weighted Average Shares |
498,169 | 498,472 | |||||
Net loss per share |
$ | (55.46 | ) | $ | (66.44 | ) | |
F-40
5. Pension plan
The Company provides pension benefits to the employees of Elfa under collectively bargained pension plans in Sweden, which are recorded in other long-term liabilities. The defined benefit plan provides benefits for participating employees based on years of service and final salary levels at retirement. Certain employees also participate in defined contribution plans for which Company contributions are determined as a percentage of participant compensation. The defined benefit plans are unfunded and approximately 2% of Elfa employees are participants in the defined benefit pension plan. The Company recorded $742 and $807 for total pension costs in the quarters ended June 1, 2013 and May 26, 2012, respectively.
6. Income taxes
The Company's effective income tax rate for the first quarter of fiscal year 2013 was 25.7% compared to 20.9% for the first quarter of fiscal year 2012. The effective income tax rates fell below the federal statutory rate primarily due to decreases in the valuation allowance and the effects of foreign income taxes.
7. Commitments and contingencies
In connection with insurance policies, the Company has outstanding standby letters of credit totaling $2,793 as of June 1, 2013.
The Company is subject to ordinary litigation and routine reviews by regulatory bodies that are incidental to its business, none of which is expected to have a material adverse effect on the Company's financial condition, results of operations, or cash flows.
8. Stockholder's equity
Common stock
On August 16, 2007, the Company issued 500,356 shares of common stock with a par value of $0.01 per share at a price of $100 per share. The holders of common stock are entitled to one vote per common share. The holders have no preemptive or other subscription rights and there are no redemptions or sinking fund provisions with respect to such shares. Common stock is subordinate to the preferred stock with respect to rights upon liquidation and dissolution of the Company.
Preferred Stock
On August 16, 2007, the Company issued 202,480 shares each of 12% Senior Cumulative Preferred Stock (Senior) and 12% Junior Cumulative Preferred Stock (Junior), each with a par value of $0.01 per share with a liquidation preference of $1,000 per share as of the date of issuance. The holders of the outstanding series of Senior and Junior Preferred Stock shall be entitled to receive quarterly distributions in the form of cash dividends on each share of Senior and Junior Preferred Stock, at a rate per annum equal to 12% of the liquidation preference. Dividends shall accrue on a daily basis from the preferred stock issue date and are cumulative from such date, regardless of whether the Company has earnings or profits, there are funds legally available for the payment of such dividends, the Company has sufficient cash, or whether dividends are declared. Accumulated unpaid dividends in respect of each dividend period will accrue dividends from the applicable dividend payment date, payable quarterly, at a rate per annum equal to 12% of the amount of such accumulated unpaid dividends. Dividends shall be payable when, as, and if declared by the Board of Directors, quarterly in arrears on each dividend payment date. Dividends payable on shares of the
F-41
Senior and Junior Preferred Stock for any year shall be computed on the basis of a 360-day year of 12 30-day months.
On April 9, 2013, the Company paid a dividend distribution to holders of Senior Cumulative Preferred Stock in the amount of $90.0 million. Refer to Note 2 for a discussion of the Repricing Transaction whereby $90.0 million of additional secured term loans was executed to fund this dividend payment. There were $315,145, $382,847, and $313,654 cumulative preferred share dividends in arrears as of June 1, 2013, March 2, 2013 and May 26, 2012, respectively. These dividends have not been declared by the Board of Directors and, therefore, have not been accrued on the accompanying consolidated balance sheets.
Subject to the priority of any senior securities, upon any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Company, the holders of shares of Senior and Junior Preferred Stock then outstanding shall be entitled to be paid, out of the assets of the Company available for distribution to its stockholders: (i) $1,000 per share of Senior Preferred Stock plus (ii) an amount equal to (A) all accumulated and unpaid dividends in respect of the Senior and Junior Preferred Stock, plus (B) dividends accrued on accumulated unpaid dividends plus (C) any accrued dividends for the current dividend period and the amounts described in clauses (i) and (ii) (collectively, the "liquidation preference") before any payment shall be made or any assets distributed to the holders of any junior securities, including the common stock of the Company. Upon the closing of an initial public offering, immediately following the payment of (i)and (ii) above, the Company will exchange each outstanding share of preferred stock by the initial public offering price of a share of the Company's common stock in the offering, net of the underwriting discount and a pro rata portion, based upon the number of shares being sold in the offering, of the estimated offering-related expenses incurred by the Company.
Neither the Senior nor Junior Preferred Stock have voting rights, except: (a) as required by Delaware and other applicable law and (b) that holders of a majority of the outstanding shares of the particular class of Preferred Stock, voting as a separate class, will have the right to approve (i) each issuance by the Company of any (A) securities that rank senior to the particular class of Preferred Stock as to dividends or distributions upon a liquidation, or (B) securities that rank on a parity with the particular class of Preferred Stock as to dividends or distributions upon a liquidation and (ii) any amendment of the Company's articles of incorporation, which (A) adversely affects any of the preferences or powers of the particular class of Preferred Stock or (B) authorizes the issuance of additional shares of the particular class of Preferred Stock.
9. Accumulated other comprehensive income (loss) (AOCI)
A rollforward of the amounts included in AOCI, net of taxes, is shown below for the quarter ended June 1, 2013:
|
Foreign currency forward contracts |
Minimum pension liability |
Foreign currency translation |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance at March 2, 2013 |
$ | 1,545 | $ | (972 | ) | $ | 2,140 | $ | 2,713 | ||||
Other comprehensive income (loss) before reclassifications, net of tax |
(660 | ) | | (1,926 | ) | (2,586 | ) | ||||||
Amounts reclassified to earnings, net of tax |
(285 | ) | | | (285 | ) | |||||||
Balance at June 1, 2013 |
$ | 600 | $ | (972 | ) | $ | 214 | $ | (158 | ) | |||
F-42
Amounts reclassified from accumulated other comprehensive income (loss) for the foreign currency forward contracts category are generally included in Cost of Sales in the Company's Consolidated Statements of Operations. For a description of the Company's use of foreign currency forward contracts, refer to Note 10.
10. Foreign currency forward contracts
The Company's international operations and purchases of its significant product lines from foreign suppliers are subject to certain opportunities and risks, including foreign currency fluctuations. The Company utilizes foreign currency forward exchange contracts in Swedish krona to stabilize its retail gross margins and to protect its domestic operations from downward currency exposure by hedging purchases of inventory from its wholly owned subsidiary, Elfa. In fiscal years 2012 and 2011, the Company used forward contracts for 85% and 77% of inventory purchases in Swedish krona each year, respectively. All of the Company's currency-related hedge instruments have terms from 1 to 12 months and require the Company to exchange currencies at agreed-upon rates at settlement. The counterparties to the contracts consist of a limited number of major domestic and international financial institutions. The Company does not hold or enter into financial instruments for trading or speculative purposes. The Company records its financial hedge instruments on a gross basis and generally does not require collateral from these counterparties because it does not expect any losses from credit exposure. The Company does not have any material financial hedge instruments that do not qualify for hedge accounting treatment as of June 1, 2013 and May 26, 2012. The Company records all foreign currency forward contracts on its consolidated balance sheets at fair value. Forward contracts not designated as hedges are adjusted to fair value through income.
The Company accounts for its foreign currency hedge instruments as cash flow hedges, as defined. Changes in the fair value of the foreign currency hedge instruments that are considered to be effective, as defined, are recorded in other comprehensive income (loss) until the hedged item (inventory) is sold to the customer, at which time the deferred gain or loss is recognized through cost of sales. Any portion of a change in the foreign currency hedge instruments' fair value that is considered to be ineffective, as defined, or that the Company has elected to exclude from its measurement of effectiveness, is immediately recorded in earnings as cost of sales. The Company recorded the fair value of its unsettled foreign currency forward contracts as cash flow hedges, resulting in a $329 and $1,103 total current asset in the unaudited consolidated balance sheet as of June 1, 2013 and March 2, 2013, respectively. The fair value of unsettled foreign currency forward contracts resulted in a $548 total current liability in the consolidated balance sheet as of May 26, 2012.
The Company recorded $600 in accumulated other comprehensive gain at June 1, 2013. Of the $600, $270 represents unrealized gains that have been recorded for settled forward contracts related to inventory on hand as of June 1, 2013. The Company expects the unrealized gain of $270, net of taxes, to be reclassified into earnings over the next 12 months as the underlying inventory is sold to the end customer.
11. Fair value measurements
Under generally accepted accounting principles, the Company is required to a) measure certain assets and liabilities at fair value or b) disclose the fair values of certain assets and liabilities recorded at cost. Accounting standards define fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date. Fair value is calculated assuming the transaction occurs in the principal or most advantageous market for the asset or liability and includes consideration of non-performance risk and credit risk of both parties.
F-43
Accounting standards pertaining to fair value establish a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value. These tiers include:
As of June 1, 2013, March 2, 2013, and May 26, 2012, the Company held certain items that are required to be measured at fair value on a recurring basis. These included cash and cash equivalents, the nonqualified retirement plan, and foreign currency forward contracts. Cash and cash equivalents consist of cash on hand and short-term, highly liquid investments, all of which have maturities of 90 days or less. The nonqualified retirement plan consists of investments purchased by employee contributions to retirement savings accounts. Foreign currency forward contracts are related to the Company's efforts to manage foreign currency fluctuation on purchases of inventory in Swedish krona. The Company's foreign currency hedge instruments consist of over-the-counter (OTC) contracts, which are not traded on a public exchange. See Note 10 for further information on the Company's hedging activities.
The fair values of the nonqualified retirement plan and foreign currency forward contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. Therefore, the Company has categorized these items as Level 2. The Company has consistently applied these valuation techniques in all periods presented and believes it has obtained the most accurate information available for the types of contracts it holds.
The following items are measured at fair value on a recurring basis, subject to the disclosure requirements of ASC 820 at June 1, 2013, March 2, 2013, and May 26, 2012:
Description |
|
June 1 2013 |
March 2 2013 |
May 26 2012 |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets |
||||||||||||
Cash and cash equivalents |
Level 1 | $ | 13,703 | $ | 25,351 | $ | 17,565 | |||||
Nonqualified retirement plan |
Level 2 | 2,817 | 2,569 | 2,089 | ||||||||
Foreign currency hedge instruments |
Level 2 | 329 | 1,103 | | ||||||||
Total assets |
$ | 16,849 | $ | 29,023 | $ | 19,654 | ||||||
Liabilities |
||||||||||||
Nonqualified retirement plan |
Level 2 | $ | 2,824 | $ | 2,582 | $ | 2,100 | |||||
Foreign currency hedge instruments |
Level 2 | | | 548 | ||||||||
Total liabilities |
$ | 2,824 | $ | 2,582 | $ | 2,648 | ||||||
F-44
The fair values of long-term debt were estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements (Level 3 valuations). As of June 1, 2013 and March 2, 2013, the carrying values and estimated fair values of the Company's long-term debt, including current maturities, were:
|
June 1 2013 | ||||||
---|---|---|---|---|---|---|---|
|
Carrying value |
Fair value |
|||||
Secured term loan, U.S. ($362 million) |
$ | 362,250 | $ | 362,250 | |||
Secured term loan, Sweden |
4,719 | 4,776 | |||||
Other loans |
5,902 | 5,892 | |||||
|
$ | 372,871 | $ | 372,918 | |||
|
March 2 2013 | ||||||
---|---|---|---|---|---|---|---|
|
Carrying value |
Fair value |
|||||
Secured term loan, U.S. ($275 million) |
$ | 272,938 | $ | 261,718 | |||
Secured term loan, Sweden |
5,812 | 5,864 | |||||
Other loans |
6,621 | 6,675 | |||||
|
$ | 285,371 | $ | 274,257 | |||
12. Segment reporting
The Company's reportable segments were determined on the same basis as how it evaluates the performance internally. The Company's two reportable segments consist of TCS and Elfa. The TCS segment includes the Company's retail stores, website and call center, as well as the installation services business that was acquired in fiscal 2011. These operating segments have been aggregated into a single reportable segment based on the similar customer base that they share, the merchandise offered is largely the same, and also because they are closely integrated logistically and operationally.
The Elfa segment includes the manufacturing business which produces the elfa® brand products that are sold domestically exclusively through the TCS segment, as well as throughout Europe. The intersegment sales in the Elfa column represent elfa® product sales to the TCS segment. These sales and the related gross margin on product recorded in TCS inventory balances at the end of the period are eliminated for consolidation purposes in the Corporate/Other column. The net sales to external customers in the Elfa column represent sales to customers outside of the United States.
Amounts in the Corporate/Other column include unallocated corporate expenses and assets, intersegment eliminations and other adjustments to segment results necessary for the presentation of consolidated financial results in accordance with generally accepted accounting principles.
In general, the Company uses the same measurements to calculate earnings or loss before income taxes for reportable segments as it does for the consolidated company. However, interest expense and loss on
F-45
extinguishment of debt related to the domestic secured term loan and revolver is recorded in the Corporate/Other column.
Quarter ended June 1, 2013 |
TCS |
Elfa |
Corporate/ other |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Sales to External Customers |
$ | 137,479 | $ | 22,166 | | $ | 159,645 | ||||||
Intersegment Sales |
| 8,309 | (8,309 | ) | | ||||||||
Interest expense, net |
17 | 240 | 5,298 | 5,555 | |||||||||
Earnings (loss) before income taxes(1) |
2,364 | (1,150 | ) | (8,387 | ) | (7,173 | ) | ||||||
Assets(2) |
579,820 | 140,048 | 23,169 | 743,037 | |||||||||
Quarter ended May 26, 2012 |
TCS |
Elfa |
Corporate/ other |
Total |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Net Sales to External Customers |
$ | 122,003 | $ | 23,752 | | $ | 145,755 | ||||||
Intersegment Sales |
| 7,480 | (7,480 | ) | | ||||||||
Interest expense, net |
30 | 241 | 5,527 | 5,798 | |||||||||
Earnings (loss) before income taxes(1) |
849 | (1,509 | ) | (14,464 | ) | (15,124 | ) | ||||||
Assets(2) |
554,735 | 144,606 | 18,107 | 717,448 | |||||||||
(1) The Corporate/Other column includes $1,101 and $7,236 loss on extinguishment of debt in the quarters ended June 1, 2013 and May 26, 2012, respectively.
(2) Tangible assets and trade names in the Elfa column are located outside of the United States. Assets in Corporate/Other include assets located in corporate headquarters and distribution center, and includes deferred tax assets and fair value of forward contracts
13. Subsequent events
The Company has evaluated subsequent events through July 12, 2013 which is the date the financial statements were available to be issued.
The Company plans to confidentially submit a Form S-1 registration statement under the Securities Act of 1933 on July 12, 2013 in an initial public offering of shares of its common stock. Upon closing of the offering, the ownership interest of holders of common stock will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of common stock after the offering, after giving effect to the exchange of all outstanding shares of our preferred stock.
F-46
Until , 2013 (25 days after the date of this prospectus), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Part II
Information not required in prospectus
Item 13. Other expenses of issuance and distribution.
The following table indicates the expenses to be incurred in connection with the offering described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the Securities and Exchange Commission registration fee, the FINRA filing fee and the New York Stock Exchange listing fee.
|
Amount |
|||
---|---|---|---|---|
Securities and Exchange Commission registration fee |
$ | * | ||
FINRA filing fee |
* | |||
New York Stock Exchange listing fee |
* | |||
Accountants' fees and expenses |
* | |||
Legal fees and expenses |
* | |||
Blue Sky fees and expenses |
* | |||
Transfer Agent's fees and expenses |
* | |||
Printing and engraving expenses |
* | |||
Miscellaneous |
* | |||
Total expenses |
$ | * | ||
* To be filed by amendment.
Item 14. Indemnification of directors and officers.
Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our certificate of incorporation provides that no director of the Registrant shall be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.
Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the
II-1
corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Our certificate of incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our certificate of incorporation provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys' fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.
We have entered into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.
We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.
In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), against certain liabilities.
II-2
Item 15. Recent sales of unregistered securities.
Set forth below is information regarding shares of capital stock issued by us within the past three years. Also included is the consideration received by us for such shares, if any, and information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed.
(a) Issuance of capital stock
On December 3, 2012 we issued 200 shares of our common stock to an employee in connection with her retirement at a price per share of $100.00.
No underwriters were involved in the foregoing issuance of securities. This transaction was exempt from registration under the Securities Act, pursuant to Section 4(2) of the Securities Act or Regulation D, relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required.
(b) Stock option grants
The issuance of stock options and the shares of common stock issuable upon the exercise of the options described in this paragraph (b) of Item 15 were issued pursuant to written compensatory plans or arrangements with our employees, directors and consultants, in reliance on the exemption provided by Rule 701 promulgated under the Securities Act, or pursuant to Section 4(2) under the Securities Act, relative to transactions by an issuer not involving any public offering, to the extent an exemption from such registration was required.
All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. All certificates representing the issued shares of capital stock described in this Item 15 included appropriate legends setting forth that the securities have not been registered and the applicable restrictions on transfer.
Item 16. Exhibits and financial statement schedules.
(a) Exhibits.
Exhibit number |
Description of exhibit |
|
---|---|---|
1.1* | Form of Underwriting Agreement. | |
3.1* | Form of Amended and Restated Certificate of Incorporation of The Container Store Group, Inc., to be effective upon the closing of this offering. | |
3.2* | Form of Amended and Restated By-laws of The Container Store Group, Inc., to be effective upon the closing of this offering. | |
4.1* | Specimen Stock Certificate evidencing the shares of common stock. | |
4.2* | Form of Amended and Restated Stockholders Agreement, to be effective upon the closing of this offering. | |
5.1* | Opinion of Latham & Watkins LLP. | |
10.1 | Stock Incentive Plan. | |
10.2 | Form of Non-Qualified Stock Option Agreement under Stock Incentive Plan. | |
10.3 | The Container Store, Inc. Non-Qualified Retirement Plan dated as of March 28, 2011. |
II-3
Exhibit number |
Description of exhibit |
|
---|---|---|
10.4 | Amended and Restated Employment Agreement dated October 31, 2012 between Kip Tindell and The Container Store Group, Inc. | |
10.5 | Amended and Restated Employment Agreement dated October 31, 2012 between Sharon Tindell and The Container Store Group, Inc. | |
10.6 | Amended and Restated Employment Agreement dated October 31, 2012 between Melissa Reiff and The Container Store, Inc. | |
10.7* | Form of 2013 Equity Plan. | |
10.8 | Amendment No. 1, dated as of April 8, 2013 to the Credit Agreement dated as of April 6, 2012, among The Container Store, Inc., as Borrower, the Guarantors party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent and Wells Fargo Bank, N.A. as Syndication Agent. | |
10.9 | Term Facility Pledge Agreement, dated as of April 6, 2012, by and between The Container Store, Inc. as Borrower, the Pledgors party thereto, and JPMorgan Chase Bank, N.A., as Collateral Agent. | |
10.10 | Term Facility Security Agreement, dated as of April 6, 2012, by and among The Container Store, Inc., the Guarantors party thereto, the Grantors party thereto, and JPMorgan Chase Bank, N.A., as Collateral Agent. | |
10.11 | Intercreditor Agreement, dated as of April 6, 2012, by and between JPMorgan Chase Bank, N.A. as ABL Agent, and JPMorgan Chase Bank, N.A. as Term Agent. | |
10.12 | Credit Agreement, dated as of April 6, 2012, among The Container Store, Inc., as Borrower, the Guarantors party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent and Wells Fargo Bank, N.A. as Syndication Agent. | |
10.13 | Amendment No.1, dated as of April 8, 2013, to the ABL Credit Agreement, dated as of April 6, 2012, among The Container Store, Inc., as Borrower, the Guarantors party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wells Fargo Bank, National Sssociation, as Syndication Agent and the other lenders party thereto. | |
10.14 | ABL Facility Pledge Agreement, dated as of April 6, 2012, by and between The Container Store, Inc., the Pledgors party thereto and JPMorgan Chase Bank, N.A., as Collateral Agent. | |
10.15 | ABL Facility Security Agreement, dated as of April 6, 2012, by and among The Container Store, Inc., the Guarantors party thereto, the Grantors party thereto and JPMorgan Chase Bank, N.A., as Collateral Agent. | |
10.16 | Credit Agreement, dated April 27, 2009, among Elfa International AB, as Borrower, and Tjustbygdens Sparbank AB, as Bank, as transferred to Swedbank AB on January 27, 2012. | |
10.17* | Form of Indemnification Agreement to be entered into by and between The Container Store Group, Inc. and certain directors and officers, to be effective upon the closing of this offering. | |
10.18 | Office, Warehouse and Distribution Center Lease Agreement, as of October 8, 2012, by and between Texas Dugan Limited Partnership, as landlord, and The Container Store, Inc., as tenant, as amended through August 24, 2011. | |
10.19* | Form of Exchange Agreement, by and between The Container Store Group, Inc. and each of the holders of senior preferred stock and junior preferred stock listed on the signature pages thereto. | |
21.1 | Subsidiary List. | |
23.1* | Consent of Ernst & Young LLP. | |
23.2* | Consent of Latham & Watkins LLP (included in Exhibit 5.1). | |
24.1* | Power of Attorney (included on signature page). | |
* To be filed by amendment.
Indicates a management contract or compensatory plan or arrangement.
II-4
(b) Financial statement schedules.
Financial statement schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
The undersigned registrant hereby undertakes to provide to the underwriter, at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned hereby undertakes that:
II-5
securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
II-6
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Coppell, State of Texas, on this day of , 2013.
THE CONTAINER STORE GROUP, INC. | ||||
By: |
William A. "Kip" Tindell, III Chief Executive Officer and Chairman of the Board of Directors |
We, the undersigned officers and directors of The Container Store Group, Inc., hereby severally constitute and appoint William A. "Kip" Tindell, III, Melissa Reiff and Jodi Taylor, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement (or any other registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities held on the dates indicated.
Signature |
Title |
Date |
||
---|---|---|---|---|
William A. "Kip" Tindell, III |
Chief Executive Officer and Chairman of the Board of Director (principal executive officer) | , 2013 | ||
Jodi Taylor |
Chief Financial Officer (principal financial officer) |
, 2013 |
||
Natalie Levy |
Vice President of Accounting (principal accounting officer) |
, 2013 |
||
Sharon Tindell |
Chief Merchandising Officer and Director |
, 2013 |
II-7
Signature |
Title |
Date |
||
---|---|---|---|---|
Melissa Reiff |
President, Chief Operating Officer and Director | , 2013 | ||
Jonathan D. Sokoloff |
Director |
, 2013 |
||
Timothy J. Flynn |
Director |
, 2013 |
||
J. Kristofer Galashan |
Director |
, 2013 |
||
II-8
Exhibit number |
Description of exhibit |
|
---|---|---|
1.1* | Form of Underwriting Agreement. | |
3.1* | Form of Amended and Restated Certificate of Incorporation of The Container Store Group, Inc., to be effective upon the closing of this offering. | |
3.2* | Form of Amended and Restated By-laws of The Container Store Group, Inc., to be effective upon the closing of this offering. | |
4.1* | Specimen Stock Certificate evidencing the shares of common stock. | |
4.2* | Form of Amended and Restated Stockholders Agreement, to be effective upon the closing of this offering. | |
5.1* | Opinion of Latham & Watkins LLP. | |
10.1 | Stock Incentive Plan. | |
10.2 | Form of Non-Qualified Stock Option Agreement under Stock Incentive Plan. | |
10.3 | The Container Store, Inc. Non-Qualified Retirement Plan dated as of March 28, 2011. | |
10.4 | Amended and Restated Employment Agreement dated October 31, 2012 between Kip Tindell and The Container Store Group, Inc. | |
10.5 | Amended and Restated Employment Agreement dated October 31, 2012 between Sharon Tindell and The Container Store Group, Inc. | |
10.6 | Amended and Restated Employment Agreement dated October 31, 2012 between Melissa Reiff and The Container Store, Inc. | |
10.7* | Form of 2013 Equity Plan. | |
10.8 | Amendment No. 1, dated as of April 8, 2013 to the Credit Agreement dated as of April 6, 2012, among The Container Store, Inc., as Borrower, the Guarantors party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent and Wells Fargo Bank, N.A. as Syndication Agent. | |
10.9 | Term Facility Pledge Agreement, dated as of April 6, 2012, by and between The Container Store, Inc. as Borrower, the Pledgors party thereto, and JPMorgan Chase Bank, N.A., as Collateral Agent. | |
10.10 | Term Facility Security Agreement, dated as of April 6, 2012, by and among The Container Store, Inc., the Guarantors party thereto, the Grantors party thereto, and JPMorgan Chase Bank, N.A., as Collateral Agent. | |
10.11 | Intercreditor Agreement, dated as of April 6, 2012, by and between JPMorgan Chase Bank, N.A. as ABL Agent, and JPMorgan Chase Bank, N.A. as Term Agent. | |
10.12 | Credit Agreement, dated as of April 6, 2012, among The Container Store, Inc., as Borrower, the Guarantors party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent and Wells Fargo Bank, N.A. as Syndication Agent. | |
10.13 | Amendment No.1, dated as of April 8, 2013, to the ABL Credit Agreement, dated as of April 6, 2012, among The Container Store, Inc., as Borrower, the Guarantors party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent, Wells Fargo Bank, National Sssociation, as Syndication Agent and the other lenders party thereto. | |
10.14 | ABL Facility Pledge Agreement, dated as of April 6, 2012, by and between The Container Store, Inc., the Pledgors party thereto and JPMorgan Chase Bank, N.A., as Collateral Agent. | |
10.15 | ABL Facility Security Agreement, dated as of April 6, 2012, by and among The Container Store, Inc., the Guarantors party thereto, the Grantors party thereto and JPMorgan Chase Bank, N.A., as Collateral Agent. | |
10.16 | Credit Agreement, dated April 27, 2009, among Elfa International AB, as Borrower, and Tjustbygdens Sparbank AB, as Bank, as transferred to Swedbank AB on January 27, 2012. |
Exhibit number |
Description of exhibit |
|
---|---|---|
10.17* | Form of Indemnification Agreement to be entered into by and between The Container Store Group, Inc. and certain directors and officers, to be effective upon the closing of this offering. | |
10.18 | Office, Warehouse and Distribution Center Lease Agreement, as of October 8, 2012, by and between Texas Dugan Limited Partnership, as landlord, and The Container Store, Inc., as tenant, as amended through August 24, 2011. | |
10.19* | Form of Exchange Agreement, by and between The Container Store Group, Inc. and each of the holders of senior preferred stock and junior preferred stock listed on the signature pages thereto. | |
21.1 | Subsidiary List. | |
23.1* | Consent of Ernst & Young LLP. | |
23.2* | Consent of Latham & Watkins LLP (included in Exhibit 5.1). | |
24.1* | Power of Attorney (included on signature page). | |
* To be filed by amendment.
Indicates a management contract or compensatory plan or arrangement.
Exhibit 10.1
2012 STOCK OPTION PLAN
OF
TCS HOLDINGS, INC.
TCS Holdings, Inc., a Delaware corporation, hereby adopts this 2012 Stock Option Plan of TCS Holdings, Inc. The purposes of the Plan (as defined herein) are as follows:
(1) To further the growth, development and financial success of the Company and its Subsidiaries (as defined herein) by providing additional incentives to Employees, Consultants and Independent Directors (as such terms are defined below) of the Company and its Affiliates who have been or will be given responsibility for the management or administration of the Companys or one of its Affiliates business affairs, by assisting them to become owners of Common Stock (as defined herein), thereby enabling them to benefit directly from the growth, development and financial success of the Company and its Subsidiaries.
(2) To enable the Company and its Subsidiaries to obtain and retain the services of the type of professional, technical and managerial Employees, Consultants and Independent Directors considered essential to the long-range success of the Company and its Subsidiaries by providing and offering them an opportunity to become owners of Common Stock through the exercise of Options (as defined herein), including, in the case of certain Employees, Options that are intended to qualify as incentive stock options under Section 422 of the Code (as defined herein).
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The singular pronoun shall include the plural where the context so indicates.
Section 1.1 Administrator means the Committee to which the Board has delegated its powers and authority under the Plan pursuant to Section 6 or, prior to such delegation, the Board.
Section 1.2 Affiliate shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person where control shall have the meaning given to such term under Rule 405 of the Securities Act.
Section 1.3 Board shall mean the Board of Directors of the Company.
Section 1.4 California Optionee shall mean an Optionee who is a resident of the State of California at the time that an Option is granted under the Plan.
Section 1.5 California Regulations Code shall mean the California Code of Regulations, as in effect from time to time.
Section 1.6 Code shall mean the Internal Revenue Code of 1986, as amended.
Section 1.7 Committee means one or more committees or subcommittees of the Board, which may be comprised of one or more directors and/or executive officers of the Company that are delegated duties, powers or authorities pursuant to Section 6.2, in either case, to the extent permitted in accordance with applicable laws, rules, regulations and stock exchange requirements.
Section 1.8 Common Stock shall mean the common stock, par value $0.01 per share, of the Company and such other class of stock into which such common stock is hereafter converted or exchanged.
Section 1.9 Company shall mean TCS Holdings, Inc., a Delaware corporation, or any successor thereto. Except where the context otherwise requires, the term Company includes any of the Companys present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a significant interest, as determined by the Administrator.
Section 1.10 Consultant shall mean any consultant or adviser if: (a) the consultant or adviser renders bona fide services to the Company or an Affiliate thereof; (b) the services rendered by the consultant or adviser are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Companys securities; and (c) the consultant or adviser is a natural person.
Section 1.11 Corporate Event shall mean, as determined by the Board in its sole discretion, any transaction or event described in Section 7.1(a) or any unusual or nonrecurring transaction or event affecting the Company, any Affiliate of the Company, or the financial statements of the Company or any Affiliate of the Company, or any change in applicable laws, regulations, or accounting principles.
Section 1.12 Director shall mean a member of the Board or a member of the board of directors of any Affiliate of the Company.
Section 1.13 Eligible Representative for an Optionee shall mean such Optionees personal representative or such other person as is empowered under the deceased Optionees will or the then applicable laws of descent and distribution to represent the Optionee hereunder.
Section 1.14 Employee shall mean, with respect to any entity, any employee of such entity (as defined in accordance with the regulations and revenue rulings then applicable under Section 3401(c) of the Code). An Optionee shall not cease to be an Employee in the case of any leave of absence approved by the Company; provided that, for purposes of Incentive Stock Options, no such leave may exceed ninety (90) days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then for this purpose, such Employees employment shall be considered terminated as of the first day immediately following expiration of such 90-day period. If reemployment upon expiration of a longer period of leave is guaranteed by statute or contract, then for this purpose, such Employees employment shall be
considered terminated as of the first day immediately following expiration of such guaranteed period of leave.
Section 1.15 Equity Restructuring shall mean a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Common Stock (or other securities of the Company) or the share price of the Common Stock (or other securities) and causes a change in the per share value of the Common Stock underlying outstanding Options.
Section 1.16 Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
Section 1.17 Fair Market Value of a share of Common Stock as of a given date shall, except as specifically set forth in Section 5.3(c), be:
(a) The closing price of a share of Common Stock on the New York Stock Exchange, Nasdaq or such other principal exchange on which such shares are then trading, if any (or as reported on any composite index which includes the New York Stock Exchange, Nasdaq or such other principal exchange), for such date, or if no sale occurred on such date, the most recent trading day prior to such determination date on which a sale occurred; or
(b) If Common Stock is not traded on an exchange but is quoted on a quotation system, the mean between the closing representative bid and asked prices for a share of Common Stock on such date, or if no sale occurred on such date, the most recent trading day prior to such determination date on which sales prices or bid and asked prices, as applicable, as reported by such quotation system; or
(c) If Common Stock is not publicly traded on an exchange and not quoted on a quotation system, the fair market value of a share of Common Stock as determined by the Board in its sole discretion.
Section 1.18 Incentive Stock Option shall mean an Option that conforms to the applicable provisions of Section 422 of the Code and that is designated as an Incentive Stock Option by the Administrator.
Section 1.19 Independent Director shall mean a Director who is not an Employee of the Company or any of its Affiliates.
Section 1.20 Initial Public Offering shall mean the first issuance by the Company of any class of common equity securities that is required to be registered (other than on a Form S-8) under Section 12 of the Exchange Act.
Section 1.21 Non-Qualified Stock Option shall mean an Option which is not an incentive stock option within the meaning of Section 422 of the Code.
Section 1.22 Officer shall mean an officer, as defined in Rule 16a-l(f) under the Exchange Act, as such Rule may be amended from time to time.
Section 1.23 Option shall mean an option granted under the Plan to purchase Common Stock. Subject to Section 3.2, an Option shall, as determined by the Administrator, be either an Incentive Stock Option or a Non-Qualified Stock Option.
Section 1.24 Optionee shall mean an Employee, Consultant or Independent Director to whom an Option is granted under the Plan.
Section 1.25 Person shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
Section 1.26 Plan shall mean this 2012 Stock Option Plan of TCS Holdings, Inc., as amended from time to time.
Section 1.27 Rule 16b-3 shall mean Rule 16b-3 promulgated under the Exchange Act, as such Rule may be amended from time to time.
Section 1.28 Securities Act shall mean the Securities Act of 1933, as amended.
Section 1.29 Stock Option Agreement shall have the meaning set forth in Section 4.1.
Section 1.30 Stockholders Agreement shall mean an agreement by and between the Optionee and the Company which contains certain restrictions and limitations applicable to the shares of Common Stock acquired upon Option exercise (and/or to other shares of Common Stock, if any, held by the Optionee during the term of such agreement), the terms of which shall be determined by the Board in its discretion.
Section 1.31 Subsidiary of any entity shall mean any corporation in an unbroken chain of corporations beginning with such entity if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
Section 1.32 Termination of Consultancy shall mean the time when the engagement of an Optionee as a Consultant to the Company or an Affiliate thereof is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding a termination where there is a simultaneous commencement of employment with the Company or any Affiliate thereof. The determination of whether a Termination of Consultancy has occurred shall be made in the sole and absolute discretion of the Administrator and, for the avoidance of doubt, may include a termination of a Consultants services even if the Consultant continues to provide services to an unrelated Affiliate of the Company following such termination.
Section 1.33 Termination of Directorship shall mean the time when an Optionee who is an Independent Director ceases to be a Director for any reason, including but not by way of limitation, a termination by resignation, failure to be elected or appointed, death or retirement. The determination of whether a Termination of Directorship has occurred shall be made in the sole and absolute discretion of the Board and, for the avoidance of doubt, may include a
termination of a Directors services even if the Director continues to provide services to an unrelated Affiliate of the Company following such termination.
Section 1.34 Termination of Employment shall mean the time when the employee-employer relationship between an Optionee and the Company (and its Affiliates), is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death or retirement, but excluding a transfer of the Employees employment to the Company or one of its Affiliates (through termination and reemployment or otherwise). The determination of whether a Termination of Employment has occurred shall be made in the sole and absolute discretion of the Administrator.
Section 1.35 Termination of Services shall mean the time of any Termination of Employment, Termination of Consultancy or Termination of Directorship, as applicable, following which an Optionee no longer provides any services to the Company or any Affiliate thereof as (a) an Employee, (b) a Consultant, or (c) an Independent Director.
ARTICLE II.
SHARES SUBJECT TO PLAN
Section 2.1 Shares Subject to Plan. The shares of stock subject to Options shall be shares of Common Stock. Subject to Section 7.1, the aggregate number of such shares which may be issued upon exercise of Options shall not exceed 61,842 shares of Common Stock.
Section 2.2 Unexercised Options. If any Option (or portion thereof) expires or is canceled without having been fully exercised, the number of shares of Common Stock subject to such Option (or portion thereof), but as to which such Option was not exercised prior to its expiration or cancellation, may again be optioned hereunder, subject to the limitations of Section 2.1.
ARTICLE III.
GRANTING OF OPTIONS
Section 3.1 Eligibility. Subject to Section 3.2, any (a) Employee of the Company or one of its Affiliates; (b) Consultant; or (c) Independent Director shall be eligible to be granted Options.
Section 3.2 Qualification of Incentive Stock Options. Notwithstanding Section 3.1, no Incentive Stock Option shall be granted to any person who is not an Employee of the Company or one of its Subsidiaries.
Section 3.3 Granting of Options to Employees and Consultants
(a) The Administrator shall from time to time:
(i) Select from among the Employees and Consultants of the Company and any of its Affiliates (including those to whom Options have been previously granted under the Plan) such of them as in its opinion should be granted Options;
(ii) Determine the number of shares of Common Stock to be subject to such Options granted to such Employees and Consultants and, subject to Section 3.2, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options; and
(iii) Determine the terms and conditions of such Options, consistent with the Plan.
(b) Upon the selection of an Employee or Consultant of the Company or any of its Affiliates to be granted an Option pursuant to Section 3.3(a), the Administrator shall instruct the corporate secretary or another authorized Officer of the Company to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Administrator may require as a condition to the grant of an Option to such Employee or Consultant that such Employee or Consultant surrender for cancellation some or all of the unexercised Options which have been previously granted to him or her. An Option the grant of which is conditioned upon such surrender may have an Option price lower (or higher) than the Option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Administrator deems appropriate and shall be exercisable in accordance with its terms, without regard to the number of shares, price, period of exercisability or any other term or condition of the surrendered Option.
Section 3.4 Granting of Options to Independent Directors
(a) The Board may from time to time:
(i) Select from among the Independent Directors (including those to whom Options have previously been granted under the Plan) such of them as in its opinion should be granted Options;
(ii) Determine the number of shares of Common Stock to be subject to such Options granted to such selected Independent Directors; and
(iii) Determine the terms and conditions of such Options, consistent with the Plan; provided, however, that all Options granted to Independent Directors shall be Non-Qualified Stock Options.
(b) Upon the selection of an Independent Director to be granted an Option pursuant to Section 3.4(a), the Board shall instruct the corporate secretary or another authorized Officer of the Company to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Board may require as a condition to the grant of an Option to an Independent Director that the Independent Director surrender for cancellation some or all of the unexercised Options which have been previously granted to him or her. An Option the grant of which is conditioned upon such surrender may have an Option price lower (or higher) than the Option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Board deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, period of exercisability or any other term or condition of the surrendered Option.
ARTICLE IV.
TERMS OF OPTIONS
Section 4.1 Stock Option Agreement. Each Option shall be evidenced by a written stock option agreement (Stock Option Agreement), which shall be executed by the Optionee and an authorized Officer of the Company and which shall contain such terms and conditions as the Administrator shall determine, consistent with the Plan. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such Options as incentive stock options within the meaning of Section 422 of the Code.
Section 4.2 Exercisability of Options
(a) Each Option shall become exercisable according to the terms of the applicable Stock Option Agreement; provided, however, that by a resolution adopted after an Option is granted the Administrator may, on such terms and conditions as it may determine to be appropriate, accelerate the time at which such Option or any portion thereof may be exercised.
(b) Except as otherwise provided in the applicable Stock Option Agreement, no portion of an Option which is unexercisable upon Termination of Services shall thereafter become exercisable.
(c) To the extent that the aggregate Fair Market Value of stock with respect to which incentive stock options (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company or any Subsidiary thereof) exceeds $100,000, such options shall be treated as Non-Qualified Stock Options. The rule set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted, and the stock certificate issued upon exercise of Options shall designate whether such stock was acquired upon exercise of an Incentive Stock Option. For purposes of these rules, the Fair Market Value of stock shall be determined as of the date of grant of the Option granted with respect to such stock.
Section 4.3 Option Price. Unless otherwise determined by the Administrator, the exercise price of the shares subject to each Option shall be the Fair Market Value of such shares as of the date of grant of the Option related thereto; provided, however, that in the case of an Incentive Stock Option, the price per share shall be not less than (a) 100% of the Fair Market Value of such shares on the date such Option is granted and (b) notwithstanding the foregoing subsection (a), with respect to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, 110% of the Fair Market Value of such shares, in each case, on the date such Incentive Stock Option is granted.
Section 4.4 Expiration of Options. No Option may be exercised to any extent by anyone after the first to occur of the following events (or such earlier date as may be set forth in any applicable Stock Option Agreement):
(a) With respect to a Non-Qualified Stock Option, the expiration of ten years from the date the Non-Qualified Stock Option was granted; or
(b) With respect to an Incentive Stock Option in the case of an Optionee owning (within the meaning of Section 424(d) of the Code), at the time the Incentive Stock Option was granted, 10% or less of the total combined voting power of all classes of stock of the Company or any Subsidiary thereof, the expiration of ten years from the date the Incentive Stock Option was granted; or
(c) With respect to an Incentive Stock Option in the case of an Optionee owning (within the meaning of Section 424(d) of the Code), at the time the Incentive Stock Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary thereof, the expiration of five years from the date the Incentive Stock Option was granted.
Section 4.5 At-Will Services. Nothing in the Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ of, or service as a Consultant or Director to, the Company or any Affiliate thereof, or shall interfere with or restrict in any way the rights of the Company and any Affiliate thereof, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Optionee and the Company or any Affiliate thereof.
ARTICLE V.
EXERCISE OF OPTIONS
Section 5.1 Person Eligible to Exercise. During the lifetime of the Optionee, only he or she may exercise an Option (or any portion thereof); provided, however, that the Optionees Eligible Representative may exercise such Optionees Option during the period of his or her disability, notwithstanding that an Option so exercised may not qualify as an Incentive Stock Option. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement, be exercised by his or her Eligible Representative.
Section 5.2 Partial Exercise. At any time and from time to time prior to the time when the Option becomes unexercisable under the Plan or the applicable Stock Option Agreement, the exercisable portion of an Option may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the Administrator may, by the terms of the Stock Option Agreement, require any partial exercise to exceed a specified minimum number of shares.
Section 5.3 Manner of Exercise. An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the corporate secretary of all of the following
prior to the time when such Option or such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement:
(a) Notice in writing signed by the Optionee or his or her Eligible Representative stating that such Option or portion is exercised, and specifically stating the number of shares with respect to which the Option is being exercised;
(b) A copy of the Stockholders Agreement signed by the Optionee or Eligible Representative, as applicable;
(c) Full payment for the shares with respect to which such Option or portion is thereby exercised:
(i) In cash, by certified or bank cashier check, or by wire transfer; or
(ii) With the consent of the Administrator (and any additional approval as may be required by the Stockholders Agreement), (A) shares of Common Stock owned by the Optionee duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; provided (I) such method of payment is then permitted under applicable laws, rules, regulations and stock exchange requirements; (II) such Common Stock, if acquired directly from the Company, was owned by the Optionee for such minimum period of time, if any, as may be established by the Company at any time, and (III) such Common Stock is not subject to any repurchase at less than Fair Market Value (as defined in the Stockholders Agreement), forfeiture, unfulfilled vesting or other similar requirements; (B) shares of Common Stock issuable to the Optionee upon exercise of the Option, with a Fair Market Value on the date of Option exercise equal to the aggregate Option price of the shares with respect to which such Option or portion is thereby exercised; (C) following an Initial Public Offering and pursuant to any policies and procedures adopted by the Administrator, delivery of a notice that the Optionee has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; or (D) any combination of the consideration listed in this Section 5.3(c) or any other property of any kind which is deemed to constitute good and valuable consideration by the Administrator;
(d) The payment to the Company (in cash, by certified or bank cashier check, by wire transfer or by any other means of payment approved by the Administrator) of all amounts necessary to satisfy any and all federal, state and local tax withholding requirements arising in connection with the exercise of the Option; provided that the Administrator may, in its sole discretion, allow the Optionee to satisfy the withholding tax obligations arising in connection with the exercise of any Option under the Plan by electing to have the Company withhold from the Common Stock to be issued that number of shares of Common Stock having a Fair Market Value equal to the amount required to be withheld (based on minimum applicable statutory withholding rates), determined on the date that the amount of tax to be withheld is determined;
(e) Such representations and documents as the Administrator deems necessary
or advisable to effect compliance with all applicable provisions of the Securities Act, Exchange Act and any other federal or state securities laws or regulations. The Administrator may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and
(f) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof.
Section 5.4 Conditions to Issuance of Stock Certificates. The shares of Common Stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. A certificate of shares will be delivered to the Optionee at the Companys principal place of business within thirty days of receipt by the Company of the written notice and payment, unless an earlier date is agreed upon. Notwithstanding the above, the Company shall not be required to issue or deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on any and all stock exchanges on which such class of stock is then listed;
(b) The execution by the Optionee and delivery to the Company of the Stockholders Agreement;
(c) The completion of any registration or other qualification of such shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Administrator shall, in its sole discretion, deem necessary or advisable;
(d) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its sole discretion, determine to be necessary or advisable; and
(e) The payment to the Company of all amounts which it is required to withhold under federal, state or local law in connection with the exercise of the Option.
Section 5.5 Rights as Stockholders. The holder of an Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until such holder has signed the Stockholders Agreement and certificates representing such shares have been issued by the Company to such holder.
Section 5.6 Transfer Restrictions. Shares acquired upon exercise of an Option shall be subject to the terms and conditions of the Stockholders Agreement. In addition, the Administrator, in its sole discretion, may impose further restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction
shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Administrator may require an Employee to give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of an Incentive Stock Option within two years from the date of granting such Option or one year after the transfer of such shares to such Employee. The Administrator may direct that any certificates evidencing shares acquired by exercise of an Incentive Stock Option refer to such requirement.
ARTICLE VI.
ADMINISTRATION
Section 6.1 Administrator. Prior to an Initial Public Offering, the Plan shall be administered by the Administrator. Following an Initial Public Offering, if any, the Plan shall be administered by the full Board unless and until there is appointed a Compensation Committee (or another committee or a subcommittee of the Board) assuming the functions of the Administrator under the Plan (the Compensation Committee) that, unless otherwise determined by the Board, shall consist solely of two or more Independent Directors appointed by and holding office at the pleasure of the Board, each of whom is both a non-employee director as defined by Rule 16b-3 and an outside director for purposes of Section 162(m) of the Code, provided that any action taken by the Compensation Committee shall be valid and effective, whether or not members of the Compensation Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Section 6.1 or otherwise provided in the charter of the Compensation Committee. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Compensation Committee under the Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code (in each case, to the extent applicable), or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Compensation Committee. The governance of the Compensation Committee shall be subject to the charter of the Compensation Committee as approved by the Board. Vacancies in the Compensation Committee may only be filled by the Board. Notwithstanding the foregoing, the Board or Compensation Committee may delegate its authority hereunder to the extent permitted by Section 6.2.
Section 6.2 Delegation of Authority. The Administrator may, but need not, from time to time delegate some or all of its duties, powers and authority under the Plan (including, without limitation, the authority to grant Options under the Plan) to a committee or subcommittee consisting of one or more members of the Committee or of one or more Officers of the Company; provided, however, that the Committee may not delegate its authority to grant Options to individuals (a) who are subject on the date of the grant to the reporting rules under Section 16(a) of the Exchange Act, (b) whose compensation the Board or the Compensation Committee, as applicable, determines is, or may become, subject to the deduction limitations set forth in Section 162(m) of the Code or (c) who are Officers of the Company who are delegated authority by the Committee hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Administrator specifies at the time of such delegation, and the Adminstrator may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 6.2 shall serve in such capacity at the pleasure of the Committee.
Section 6.3 Duties and Powers of the Administrator. It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with its provisions. The Administrator shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan with respect to Options granted to Independent Directors and, with respect to such Options, the terms Committee and Administrator as used in the Plan shall be deemed to refer to the Board. Any such interpretations and rules in regard to Incentive Stock Options shall be consistent with the terms and conditions applicable to incentive stock options within the meaning of Section 422 of the Code. All determinations and decisions made by the Administrator under any provision of the Plan or of any Option granted thereunder shall be final, conclusive and binding on all Persons.
Section 6.4 Compensation, Professional Assistance, Good Faith Actions. All expenses and liabilities incurred by the members of the Administrator or any committee delegated authority thereby in connection with the administration of the Plan shall be borne by the Company. The Administrator and any committee delegated authority thereby may employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Administrator, any committee delegated authority thereby, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Administrator or any committee delegated authority thereby in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No member of the Administrator or any committee delegated authority thereby shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Administrator and any committee delegated authority thereby shall be fully protected by the Company in respect to any such action, determination or interpretation.
ARTICLE VII.
OTHER PROVISIONS
Section 7.1 Changes in Common Stock; Disposition of Assets and Corporate Events
(a) Subject to Section 7.1(e), in the event that the Administrator determines that any dividend or other distribution, recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event (other than an Equity Restructuring), in the Administrators sole discretion (or in the case of Options granted to Independent Directors, the Boards sole discretion), affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Option, then the Administrator shall, in such manner as it may deem equitable, adjust any or all of:
(i) The number and kind of shares of Common Stock (or other securities or property) with respect to which Options may be granted under the Plan (including, but not limited to, adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued);
(ii) The number and kind of shares of Common Stock (or other securities or property) subject to outstanding Options;
(iii) The exercise price with respect to any Option; and
(iv) the financial or other targets specified in each Stock Option Agreement for determining the exercisability of Options, if applicable.
(b) Subject to Section 7.1(e) and the terms of outstanding Stock Option Agreements, upon the occurrence of a Corporate Event, the Administrator, in its sole discretion, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Option under this Plan, to facilitate such Corporate Event or transactions or events or to give effect to such changes in laws, regulations or principles:
(i) In its sole discretion, and on such terms and conditions as it deems appropriate, the Administrator may provide, either by the terms of the applicable Stock Option Agreement or by action taken prior to the occurrence of such Corporate Event and either automatically or upon the Optionees request, for either (A) the purchase of any such Option for an amount of cash, securities, or other property equal to the amount that could have been attained upon the exercise of the vested portion of such Option (and such additional portion of the Option as the Board or Administrator may determine) immediately prior to the occurrence of such transaction or event (and, for the avoidance of doubt, if as of the date of the occurrence of such transaction or event the Administrator determines in good faith that no amount would have been obtained upon the exercise of such Option, then the Option may be terminated by the Company without payment), or (B) the replacement of such vested (and other) portion of such Option with other rights, cash, securities or other property selected by the Administrator in its sole discretion;
(ii) In its sole discretion, the Administrator may provide, either by the terms of the applicable Stock Option Agreement or by action taken prior to the occurrence of such Corporate Event, that the Option (or any portion thereof) cannot be exercised after such event;
(iii) In its sole discretion, and on such terms and conditions as it deems appropriate, the Administrator may provide, either by the terms of the applicable Stock Option Agreement or by action taken prior to the occurrence of such Corporate Event, that for a specified period of time prior to such Corporate Event, such Option shall be exercisable as to all shares covered thereby or a specified portion of such shares, notwithstanding anything to the contrary in this Plan or the applicable Stock Option Agreement;
(iv) In its sole discretion, and on such terms and conditions as it deems appropriate, the Administrator may provide, either by the terms of the applicable Stock Option
Agreement or by action taken prior to the occurrence of such Corporate Event, that upon such event, such Option (or any portion thereof) be assumed by the successor or survivor corporation, or a parent or Subsidiary thereof (including without limitation any common parent of the Company and any other company or companies), or shall be substituted for by similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or Subsidiary thereof (including without limitation any common parent of the Company and any other company or companies), with appropriate adjustments as to the number and kind of shares and prices;
(v) In its sole discretion, and on such terms and conditions as it deems appropriate, the Administrator may make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Options (or any portion thereof) and/or in the terms and conditions of (including the exercise price), and the criteria included in, outstanding Options and Options which may be granted in the future; and
(vi) In its sole discretion, and on such terms as it deems appropriate, the Administrator may, for reasons of administrative convenience, provide that some or all Options may not be exercised during a specified period of not more than thirty (30) days prior to the consummation of a Corporate Event.
(c) In connection with the occurrence of any Equity Restructuring:
(i) The number and type of securities subject to each outstanding Option and the exercise price thereof shall be equitably adjusted; and/or
(ii) The Administrator shall make such equitable adjustments, if any, as the Administrator in its discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and kind of shares of Common Stock (or other securities or property) that may be issued under the Plan (including, but not limited to, adjustments of the limitation set forth in Section 2.1). The adjustments provided under this Section 7.1(c) shall be nondiscretionary and shall be final and binding on the affected Optionee and the Company.
(d) Subject to Section 7.1(e), the Administrator may, in its sole discretion, include such further provisions and limitations in any Stock Option Agreement as it may deem equitable and in the best interests of the Company and its Affiliates.
(e) With respect to Incentive Stock Options, no adjustment or action described in this Section 7.1 or in any other provision of the Plan shall be authorized to the extent that such adjustment or action would cause such Options to cease to qualify as incentive stock options under Section 422 of the Code or any successor provisions thereto, unless the Administrator determines that the Options are not intended to comply with Section 422(b) of the Code following such adjustment. With respect to Non-Qualified Stock Options, unless otherwise determined by the Administrator, no adjustment or action described in this Section 7.1 or in any other provision of the Plan shall be authorized to the extent such adjustment or action would cause the Option to become subject to Section 409A of the Code or any successor provision thereto.
(f) To the extent required by the California Regulations Code, any adjustment or action described in this Section 7.1 or in any other provision of the Plan shall be made consistent with California Regulations Code §260.140.41(d).
(g) Notwithstanding the foregoing provisions of this Section 7.1, unless otherwise determined by the Administrator, no such adjustments shall be made in connection with (i) any equity investment by the Companys stockholders pursuant to a Corporate Event in connection with which the shares of Common Stock are sold at Fair Market Value, or (ii) any equity investment by third parties which results in a dilution of ownership of the Common Stock affecting all of the Companys stockholders.
Section 7.2 Options Not Transferable. No Option or interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that nothing in this Section 7.2 shall prevent transfers by will or by the applicable laws of descent and distribution.
Section 7.3 Amendment, Suspension or Termination of the Plan. The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Compensation Committee. However, without stockholder approval within 12 months before or after such action, no action of the Board or the Administrator may, except as provided in Section 7.1, increase any limit imposed in Section 2.1 on the maximum number of shares which may be issued on exercise of Options, reduce the minimum Option price requirements of Section 4.3, or extend the limit imposed in this Section 7.3 on the period during which Options may be granted. Except as provided by Section 7.1, neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Option, alter or impair any rights or obligations under any Option theretofore granted. No Option may be granted during any period of suspension or after termination of the Plan, and in no event may any Option be granted under this Plan after the expiration of ten years from the date the Plan is adopted by the Board or approved by the Companys stockholders, whichever is earlier.
Section 7.4 Effect of Plan Upon Other Option and Compensation Plans. The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Affiliate. Nothing in this Plan shall be construed to limit the right of the Company or any Affiliate (a) to establish any other forms of incentives or compensation for Directors, Employees or Consultants of the Company or any Affiliate; or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association.
Section 7.5 Approval of Plan by Stockholders. This Plan will be submitted for the approval of the Companys stockholders within 12 months after the date of the Boards initial
adoption of this Plan. No Option may be exercised to any extent by anyone unless and until the Plan is so approved by the stockholders, and if such approval has not been obtained by the end of said 12-month period, the Plan and all Options theretofore granted shall thereupon be canceled and become null and void.
Section 7.6 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan.
Section 7.7 Conformity to Securities Laws. The Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder to the extent the Company or any Optionee is subject to the provisions thereof. Notwithstanding anything herein to the contrary, the Plan shall be administered, and Options shall be granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and Options granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 7.8 Governing Law. To the extent not preempted by federal law, the Plan shall be construed in accordance with and governed by the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 7.9 Severability. In the event any portion of the Plan or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
Section 7.10 Section 409A. Unless otherwise determined by the Administrator, all Options granted hereunder shall be intended to be exempt from Section 409A of the Code. Accordingly, the Plan and Stock Option Agreements shall be interpreted and construed in a manner necessary or appropriate to carry out this intent. Notwithstanding any provision of the Plan to the contrary, in the event that the Administrator determines that any Option may be subject to Section 409A of the Code, the Administrator may adopt such amendments to the Plan and the applicable Stock Option Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Administrator determines are necessary or appropriate to (a) exempt the Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Option, or (b) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of penalty taxes under Section 409A of the Code. Notwithstanding anything herein to the contrary, no provision of the Plan shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A of the Code from any Optionee or other Person to the Company or any of its Affiliates, employees or agents.
Section 7.11 California Optionees. To the extent required by applicable securities laws with respect to California Optionees or otherwise, the Plan and Stock Option Agreements shall
be interpreted in accordance with the California Regulations Code. To the extent required by the California Regulations Code, California Optionees (or any other Optionees, as required by applicable securities laws) shall receive such financial statement information that the Administrator determines is necessary or appropriate to comply with California Regulations Code §260.140.46.
* * * * *
I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of TCS Holdings, Inc. as of , 2012.
I hereby certify that the foregoing Plan was adopted by the stockholders of TCS Holdings, Inc. as of , 2012.
Executed as of , 2012.
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Exhibit 10.2
NON-QUALIFIED STOCK OPTION AGREEMENT
OF
TCS HOLDINGS, INC.
THIS AGREEMENT (the Agreement) is entered into as of [ ], 2012 (the Grant Date) by and between TCS Holdings, Inc., a Delaware corporation (the Company) and [ ], an employee of the Company or one of its Affiliates (hereinafter referred to as the Optionee).
WHEREAS, the Board has approved the 2012 Stock Option Plan of TCS Holdings, Inc. (as it may be amended from time to time, the Plan), the terms of which are hereby incorporated by reference and made a part of this Agreement;
WHEREAS, the Administrator has determined that it would be to the advantage and best interest of the Company and its shareholders to grant the Non-Qualified Stock Option provided for herein to the Optionee as an inducement to enter into or remain in the service of the Company or one of its Affiliates and as an incentive for increased efforts during such service, and has advised the Company thereof and instructed the undersigned officers to issue said Option; and
WHEREAS, the Optionee has entered into a Stockholders Agreement (as defined in the Plan) with the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary. Capitalized terms used in this Agreement and not defined below shall have the meaning given such terms in the Plan. The singular pronoun shall include the plural, where the context so indicates.
Section 1.1 Agreement shall have the meaning set forth in the preamble hereto.
Section 1.2 Cause shall mean the Company or any of its Affiliates having Cause to terminate the Optionees employment as defined in any employment or severance agreement between the Optionee and the Company or any of its Affiliates; provided that, in the absence of an agreement containing such a definition, the Company or its Affiliates shall have Cause to terminate the Optionees employment upon: (a) the willful and continued failure by the Optionee to substantially perform his normal duties (other than any such failure resulting from the Optionees illness or injury), after a written demand for substantial performance is delivered to the Optionee that specifically identifies the manner in which the Company believes that the Optionee has not substantially performed his duties, and the Optionee has failed to remedy the situation within thirty (30) business days of receiving such notice; (b) the Optionees conviction for committing an act of fraud, embezzlement, theft, or other criminal act constituting
a felony; (c) the willful engaging by the Optionee in gross negligence materially and demonstrably injurious to the Company or any of its Affiliates; or (d) the Optionees violation of any of the restrictive covenants set forth in Article IV or any other written agreement by and between the Company or any of its Affiliates and the Optionee. However, no act, or failure to act on the Optionees part shall be considered willful unless done, or omitted to be done, by the Optionee not in good faith and without reasonable belief that his action or omission was not in or not opposed to the best interest of the Company.
Section 1.3 Change in Control shall mean the occurrence of any of the following events: (i) a change in ownership or control of the Company effected through a transaction or series of transactions (other than an offering of equity securities of the Company to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) (other than the Company, any of its Affiliates, any employee benefit plan maintained by the Company or any of its Affiliates, any Principal Stockholder or any person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company or a Principal Stockholder) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Companys securities outstanding immediately after such acquisition; or (ii) the consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of a sale or other disposition of all or substantially all of the Companys assets, other than a transaction which results in the Companys voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Companys assets or otherwise succeeds to the business of the Company (the Company or such person, the Successor Entity)) directly or indirectly, at least a majority of the combined voting power of the Successor Entitys outstanding voting securities immediately after the transaction.
Section 1.4 Company shall have the meaning set forth in the preamble hereto.
Section 1.5 Competitive Business shall have the meaning set forth in Section 4.4(a).
Section 1.6 Confidential Information shall have the meaning set forth in Section 4.1.
Section 1.7 Disability shall mean permanent disability or incapacity as determined in accordance with the Companys disability insurance policy, if such a policy is then in effect, or if no such policy is then in effect, such permanent disability or incapacity shall be determined by the Administrator in its good faith judgment based upon inability to perform the essential functions of his or her position, with reasonable accommodation by the Company, for a period in excess of 180 days during any period of 365 calendar days.
Section 1.8 Grant Date shall have the meaning set forth in the preamble hereto.
Section 1.9 Noncompete Period shall mean (a) if Optionees principal place of business as of the date of his or her Termination of Services is California, (i) for purposes of Section 4.4(b)(i), the period of Optionees employment or services with the Company or any of its Affiliates and the period beginning on the date of Optionees Termination of Services for any reason and ending on the first anniversary of the date of such Termination of Services and (ii) for all other purposes under this Agreement, the period of Optionees employment or services with the Company or any of its Affiliates, and (b) if Optionees principal place of business as of the date of his or her Termination of Services is not California, the period of Optionees employment or services with the Company or any of its Affiliates and the period beginning on the date of Optionees Termination of Services for any reason and ending on the first anniversary of the date of such Termination of Services.
Section 1.10 Option shall mean the Non-Qualified Stock Option to purchase Common Stock granted under this Agreement.
Section 1.11 Optionee shall have the meaning set forth in the preamble hereto.
Section 1.12 Plan shall have the meaning set forth in the Recitals hereto.
Section 1.13 Principal Stockholders shall mean Green Equity Investors V, L.P., Green Equity Investors Side V, LP, TCS Co-Invest, LLC, and any Affiliate thereof.
Section 1.14 Successor Entity shall have the meaning set forth in Section 1.3.
Section 1.15 TCS shall mean The Container Store, Inc., a Texas corporation.
Section 1.16 Third Party Information shall have the meaning set forth in Section 4.3.
Section 1.17 Work Product shall have the meaning set forth in Section 4.2.
ARTICLE II.
GRANT OF OPTION
Section 2.1 Grant of Option. In consideration of the Optionees agreement to enter into or remain in the employ of the Company or one of its Affiliates, and for other good and valuable consideration, as of the Grant Date, the Company irrevocably grants to the Optionee the Option to purchase any part or all of an aggregate of [ ] shares of Common Stock upon the terms and conditions set forth in the Plan and this Agreement. The Optionee hereby agrees that except as required by law, he or she will not disclose to any Person other than the Optionees spouse and/or tax or financial advisor (if any) the grant of the Option or any of the terms or provisions hereof without the prior approval of the Administrator, and the Optionee agrees that, in the discretion of the Administrator, the Option shall terminate and any unexercised portion of such Option (whether or not then exercisable) shall be forfeited if the Optionee or his or her spouse or tax or financial advisor violates the non-disclosure provisions of this Section 2.1. [In connection with the grant of the Option, the Optionee shall cause his or her spouse, if
any, to execute the consent attached hereto as Exhibit B as soon as practicable following the Grant Date.](1)
Section 2.2 Option Subject to Plan. The Option granted hereunder is subject to the terms and provisions of the Plan, including without limitation, Article V and Sections 7.1, 7.2 and 7.3 thereof.
Section 2.3 Option Price. The purchase price of the shares of Common Stock covered by the Option shall be [ ] per share (without commission or other charge), which is not less than 100% of Fair Market Value as of the Grant Date.
ARTICLE III.
EXERCISABILITY
Section 3.1 Commencement of Exercisability.
(a) The Option shall become exercisable in five cumulative installments provided that the Optionee remains continuously employed or engaged in active service by the Company or any of its Affiliates (and no Termination of Services occurs) from the Grant Date through such date as follows:
(i) The first installment shall consist of 20% of the shares covered by the Option and shall become exercisable on the first anniversary of the Grant Date;
(ii) The second installment shall consist of 20% of the shares covered by the Option and shall become exercisable on the second anniversary of the Grant Date;
(iii) The third installment shall consist of 20% of the shares covered by the Option and shall become exercisable on the third anniversary of the Grant Date;
(iv) The fourth installment shall consist of 20% of the shares covered by the Option and shall become exercisable on the fourth anniversary of the Grant Date; and
(v) The fifth installment shall consist of 20% of the shares covered by the Option and shall become exercisable on the fifth anniversary of the Grant Date.
(b) No portion of the Option which is unexercisable at Termination of Services for any reason shall thereafter become exercisable.
Section 3.2 Duration of Exercisability. The installments provided for in Section 3.1 are cumulative. Each such installment which becomes exercisable pursuant to Section 3.1 shall remain exercisable until it becomes unexercisable under Section 3.3. Once the Option becomes unexercisable, it shall be forfeited immediately.
(1) To be included in options grants to employees located in California and other community property jurisdictions. Remove for employees in non-community property jurisdictions.
Section 3.3 Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The tenth anniversary of the Grant Date; or
(b) Except for such longer period as the Administrator may otherwise approve, the 90th day following the date of the Optionees Termination of Services for any reason other than (i) termination by the Company for Cause or (ii) due to the Optionees death or Disability; or
(c) Notwithstanding the provisions of Section 3.1, in the event of the Optionees Termination of Services by the Company for Cause, the date of such Termination of Services, in which event, the Optionee shall, simultaneously with such Termination of Services (and subject to such Termination of Services), forfeit the Option, whether vested or unvested; or
(d) In the case of a Termination of Services due to the Optionees death or Disability, the expiration of one year from the date of the Optionees Termination of Services; or
(e) The date the Optionee has violated any of the restrictive covenants set forth herein or any applicable, written employment agreement by and between the Company or any of its Affiliates and the Optionee. To the extent Optionees principal place of business as of the Optionees Termination of Services is California, any such violation after the Optionees Termination of Services shall result in such Termination of Services constituting termination for cause for purposes of California Regulations Code §260.140.41(e).
Section 3.4 Partial Exercise. Subject to Section 5.2 of the Plan, any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable; provided, however, that each partial exercise shall be for not less than ten (10) shares, unless such partial exercise is with respect to the balance of the Option and such Option can no longer become exercisable with respect to any additional shares of Common Stock at the time of such partial exercise.
Section 3.5 Exercise of Option. The exercise of the Option shall be governed by the terms of this Agreement and the terms of the Plan, including, without limitation, the provisions of Article V of the Plan.
ARTICLE IV.
RESTRICTIVE COVENANTS(2)
In consideration of the Companys grant of this Option, the Optionee hereby makes the covenants and agreements described in this Article IV:
(2) Restrictive covenants to be removed for persons who are already subject to similar provisions under their employment agreements.
Section 4.1 Obligation to Maintain Confidentiality. The Optionee acknowledges that the confidential or proprietary information and data (including trade secrets) of the Company or any of its Subsidiaries or Affiliates obtained by the Optionee while employed by or in the service of the Company or any of its Subsidiaries or Affiliates (including, without limitation, prior to the date of this Agreement) (Confidential Information) are the property of the Company or such Subsidiaries or Affiliates, including information concerning acquisition opportunities in or reasonably related to the Companys, or such Subsidiaries or Affiliates business or industry of which the Optionee becomes aware during the period of the Optionees employment or service. Therefore, the Optionee agrees that he or she will not disclose to any unauthorized person, group or entity or use for the Optionees own account any Confidential Information without the Companys written consent, unless and to the extent that the Confidential Information, (a) becomes generally known to and available for use by the public other than as a result of the Optionees acts or omissions to act, (b) was known to the Optionee prior to the Optionees employment or service with the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order. The Optionee shall use reasonable best efforts to deliver to the Company on the date of his or her Termination of Services, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of the Company and its Subsidiaries and Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which the Optionee may then possess or have under his or her control, but excluding financial information of the Company relating to the Optionees ownership of shares of Common Stock, which information will nonetheless continue to constitute Confidential Information.
Section 4.2 Ownership of Property. The Optionee acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any Confidential Information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to the Companys or any of its Subsidiaries or Affiliates actual or anticipated business, research and development, or existing or future products or services and that were or are conceived, developed, contributed to, made, or reduced to practice by the Optionee (either solely or jointly with others) while employed by or in the service of the Company or any of its Subsidiaries or Affiliates (including, without limitation, prior to the date of this Agreement) (including any of the foregoing that constitutes any proprietary information or records) (Work Product) belong to the Company or such Subsidiary or Affiliate and the Optionee hereby assigns, and agrees to assign, all of the above Work Product to the Company or to such Subsidiary or Affiliate. Any copyrightable work prepared in whole or in part by the Optionee in the course of the Optionees work for any of the foregoing entities shall be deemed a work made for hire under the copyright laws, and the Company or such Subsidiary or Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a work made for hire, the Optionee hereby assigns and agrees to assign to the Company or such Subsidiary or Affiliate all right, title, and interest, including without limitation, copyright in and to such copyrightable work. The Optionee shall as promptly as practicable under the circumstances disclose such Work Product and copyrightable work to the Company and perform all actions reasonably requested by the Company (whether during or after the
Optionees employment with or service to the Company and its Subsidiaries and Affiliates) to establish and confirm the Companys or such Subsidiarys or Affiliates ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments). Notwithstanding the foregoing, the Optionee understands that this Agreement does not require assignment of any Work Product to the extent such Work Product qualifies for protection under Section 2870 of the California Labor Code, Section 49.44.140 of the Revised Code of Washington, 765 Illinois Compiled Statutes 1060, Section 44-130 of the Kansas Statutes, or Section 181.78 of the 2010 Minnesota Statutes, the current text of each which is attached hereto as Exhibit A.
Section 4.3 Third Party Information. The Optionee understands that the Company and its Subsidiaries and Affiliates will receive from third parties confidential or proprietary information (Third Party Information) subject to a duty on the Companys and its Subsidiaries and Affiliates part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the period of the Optionees employment with or service to the Company or its Subsidiaries or Affiliates and thereafter, and without in any way limiting the provisions of Section 4.1 above, the Optionee will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of the Company or its Subsidiaries and Affiliates who need to know such information in connection with their work for the Company or its Subsidiaries and Affiliates) or use, except in connection with the Optionees work for the Company or its Subsidiaries and Affiliates, Third Party Information unless expressly authorized by the Company in writing or unless and to the extent that the Third Party Information, (a) becomes generally known to and available for use by the public other than as a result of the Optionees acts or omissions to act, (b) was known to the Optionee prior to the Optionees employment with or service to the Company or any of its Subsidiaries and Affiliates, or (c) is required to be disclosed pursuant to any applicable law or court order.
Section 4.4 Noncompetition and Nonsolicitation. The Optionee acknowledges that, in the course of the Optionees employment, the Optionee will become familiar with the Companys and its Subsidiaries and Affiliates trade secrets and with other confidential information concerning the Company and its Subsidiaries and Affiliates and that the Optionees services will be of special, unique and extraordinary value to the Company and its Subsidiaries and Affiliates. Therefore, the Optionee agrees that:
(a) Noncompetition. During the Noncompete Period, the Optionee shall not, anywhere in the world where the Company or its Subsidiaries or Affiliates conduct or actively propose to conduct business during the Optionees employment, directly or indirectly own, manage, control, participate in, consult with, be employed by or in any manner engage in any business that is engaged in, or plans to be engaged in, the storage and organization retail business (a Competitive Business); provided, however, that the Optionee may manage, control, participate in, consult with, be employed by or in any manner engage with an entity which derives less than 5% of its gross revenues from a Competitive Business so long as the Optionees responsibilities, activities and contributions in respect of such entity do not directly impact the Competitive Business; provided further that the Optionee may own up to 2% of any class of an issuers publicly traded securities. Nothing in this Section 4.4(a) confers upon the Optionee any
right to receive severance or obligates the Company to pay any severance to the Optionee in connection with his or her Termination of Services for any reason.
(b) Nonsolicitation. During the Noncompete Period, the Optionee shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or its Subsidiaries or Affiliates to leave the employ of the Company or any of its Subsidiaries or Affiliates, or in any way interfere with the relationship between the Company or its Subsidiaries or Affiliates and any employee thereof, and (ii) hire any person who was an employee of the Company or any of its Subsidiaries or Affiliates within 180 days prior to the time such employee was hired by the Optionee, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or its Subsidiaries or Affiliates to cease doing business with the Company or its Subsidiaries or Affiliates or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or its Subsidiaries or Affiliates or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of the Company or its Subsidiaries or Affiliates and with which the Company, its Subsidiaries or Affiliates has entered into substantive negotiations or has requested and received confidential information relating to the acquisition of such business by the Company, its Subsidiaries or Affiliates in the two-year period immediately preceding the Optionees Termination of Services with the Company or any of its Subsidiaries or Affiliates.
(c) Enforcement. If, at the time of enforcement of Section 4.4(a) or (b), a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. The Optionee agrees that because his or her services are unique and the Optionee has access to confidential information, money damages would be an inadequate remedy for any breach of this Article IV. The Optionee agrees that the Company, its Subsidiaries and Affiliates, in the event of a breach or threatened breach of this Article IV, may seek injunctive or other equitable relief in addition to any other remedy available to them in a court of competent jurisdiction without posting bond or other security.
Section 4.5 Non-disparagement. The Optionee agrees that at no time during his employment by the Company or any of its Subsidiaries or Affiliates or thereafter shall he make, or cause or assist any other person to make, any statement or other communication to any third party which impugns or attacks, or is otherwise critical of, in any material respect, the reputation, business or character of the Company or any of its Subsidiaries or Affiliates or any of their respective directors, officers or employees; provided that the Optionee shall not be required to make any untruthful statement or to violate any law.
Section 4.6 Forfeiture Upon Violation. In the event of the Optionees violation of any restrictive covenant within this Article IV or, any employment agreement by and between the Optionee and the Company or any of its Affiliates, as determined by the Company, in its sole discretion, then the Optionee shall pay to the Company in cash any financial gain the Optionee realized from exercising all or a portion of this Option. For purposes of this Section 4.6, financial gain shall equal the sum of (a) any excess of the greater of (i) Fair Market Value of
the Common Stock on the date of exercise or (ii) the Fair Market Value as of the time of the Call Event (as defined in the Stockholders Agreement), if any, over the purchase price set forth in Section 2.3, multiplied by the number of shares of Common Stock purchased pursuant to the exercise (without reduction for any shares of Common Stock surrendered) and (b) any and all dividends paid to the Optionee with respect to shares of Common Stock purchased pursuant to the exercise. By accepting this Option, the Optionee hereby acknowledges, agrees and authorizes the Company to reduce any amounts owed by the Company (including amounts owed as wages or other compensation, fringe benefits, or vacation pay, as well as any other amounts owed to the Optionee by the Company), by the amounts the Optionee owes to the Company under this Section 4.6. To the extent such amounts are not recovered by the Company through such set-off, the Optionee agrees to pay such amounts immediately to the Company upon demand. This right of set-off is in addition to any other remedies the Company may have against the Optionee for the Optionees breach of this Agreement or any employment agreement. The Optionees obligations under this Section 4.6 shall be cumulative (but not duplicative) of any similar obligations the Optionee have pursuant to this Agreement or any other agreement with the Company.
Section 4.7 Acknowledgments. The Optionee acknowledges that the provisions of this Article IV are (a) in addition to, and not in limitation of, any obligation of Optionees under the terms of any employment agreement with the Company or any of its Subsidiaries or Affiliates, (b) in consideration of (i) employment with the Company or any of its Subsidiaries or Affiliates, (ii) the issuance of the Option by the Company and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, the Optionee agrees and acknowledges that the restrictions contained in Article IV do not preclude the Optionee from earning a livelihood, nor do they unreasonably impose limitations on the Optionees ability to earn a living. The Optionee agrees and acknowledges that the potential harm to the Company or its Subsidiaries or Affiliates of the non-enforcement of this Article IV outweighs any potential harm to the Optionee of its enforcement by injunction or otherwise. The Optionee acknowledges that he or she has carefully read this Agreement and has given careful consideration to the restraints imposed upon the Optionee by this Agreement, and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company, and its Subsidiaries and Affiliates now existing or to be developed in the future. The Optionee expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
ARTICLE V.
OTHER PROVISIONS
Section 5.1 Optionee Representation; Not a Contract of Employment. The Optionee hereby represents that the Optionees execution of this Agreement and participation in the Plan is voluntary and that the Optionee has in no way been induced to enter into this Agreement in exchange for or as a requirement of the expectation of service with the Company or any of its Affiliates. Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of the Company or any of its Affiliates or shall interfere with or restrict in any way the rights of the Company or its Affiliates, which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without
Cause, except as may otherwise be provided by any written agreement entered into by and between the Company and the Optionee.
Section 5.2 Shares Subject to Plan and Stockholders Agreement; Entire Agreement. The Optionee acknowledges that any shares acquired upon exercise of the Option are subject to the terms of the Plan and the Stockholders Agreement. The terms of this Agreement are intended by the parties to be the final expression of their agreement with respect to the subject matter hereof and may not be contradicted by evidence of any prior or contemporaneous agreement. The parties further intend that this Agreement (together with the Plan and the Stockholders Agreement) shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.
Section 5.3 Construction. This Agreement shall be administered, interpreted and enforced under the internal laws of the State of Delaware, without regard to the principles of conflicts of law thereof, or principles of conflicts of law of any other jurisdiction which could cause the application of the laws of any jurisdiction other than the State of Delaware.
Section 5.4 Conformity to Securities Laws. The Optionee acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the Securities and Exchange Commission, including without limitation Rule 16b-3. Notwithstanding anything herein to the contrary, the Plan and this Agreement shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
Section 5.5 Amendment, Suspension and Termination. The Option may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board; provided that neither the amendment, suspension nor termination of this Agreement shall, without the consent of the Optionee, alter or impair any rights of the Optionee or obligations of the Company under the Option. For the avoidance of doubt, adjustments made under Section 7.1 of the Plan are not amendments for this purpose.
Section 5.6 Section 409A. The Option granted hereunder is intended to be exempt from Section 409A of the Code.
[signature page follows]
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto as of the date first above written.
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EXHIBIT A
Section 2870 of the California Labor Code
As of the date of this Agreement, Section 2870 of the California Labor Code is as follows:
(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employers equipment, supplies, facilities, or trade secret information except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the invention to the employers business, or actual or demonstrably anticipated research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.
Section 49.44.140 of the Revised Code of Washington
As of the date of this Agreement, 49.44.140 of the Revised Code of Washington is as follows:
(1) A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employees rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employees own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employers actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.
(2) An employer shall not require a provision made void and unenforceable by subsection (1) of this section as a condition of employment or continuing employment.
(3) If an employment agreement entered into after September 1, 1979, contains a provision requiring the employee to assign any of the employees rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employees own time, unless (a) the invention relates (i) directly to the business of the employer, or (ii) to the employers actual or demonstrably anticipated research or development, or (b) the invention results from any work preformed [performed] by the employee for the employer.
765 Illinois Compiled Statutes 1060
As of the date of this Agreement, 765 Illinois Compiled Statutes 1060 is as follows:
(1) A provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employees rights in an invention to the employer does not apply to an invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on the employees own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employers actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this State and is to that extent void and unenforceable. The employee shall bear the burden of proof in establishing that his invention qualifies under this subsection.
(2) An employer shall not require a provision made void and unenforceable by subsection (1) of this Section as a condition of employment or continuing employment. This Act shall not preempt existing common law applicable to any shop rights of employers with respect to employees who have not signed an employment agreement.
(3) If an employment agreement entered into after January 1, 1984, contains a provision requiring the employee to assign any of the employees rights in any invention to the employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility, or trade secret information of the employer was used and which was developed entirely on the employees own time, unless (a) the invention relates (i) to the business of the employer, or (ii) to the employers actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the employee for the employer.
Section 44-130 of the Kansas Statutes
As of the date of this Agreement, Section 44-130 of the Kansas Statutes is as follows:
(a) Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employees rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facilities or trade secret information of the employer was used and which was developed entirely on the employees own time, unless:
(1) The invention relates to the business of the employer or to the employers actual or demonstrably anticipated research or development; or
(2) the invention results from any work performed by the employee for the employer.
(b) Any provision in an employment agreement which purports to apply to an invention which it is prohibited from applying to under subsection (a), is to that extent against the public policy of this state and is to that extent void and unenforceable. No employer shall require a provision made void and unenforceable by this section as a condition of employment or continuing employment.
(c) If an employment agreement contains a provision requiring the employee to assign any of the employees rights in any invention to the employer, the employer shall provide, at the time the agreement is made, a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employees own time, unless:
(1) The invention relates directly to the business of the employer or to the employers actual or demonstrably anticipated research or development; or
(2) the invention results from any work performed by the employee for the employer.
(d) Even though the employee meets the burden of proving the conditions specified in this section, the employee shall disclose, at the time of employment or thereafter, all inventions being developed by the employee, for the purpose of determining employer and employee rights in an invention.
Section 181.78 of the 2010 Minnesota Statutes
As of the date of this Agreement, Section 181.78 of the 2010 Minnesota Statutes is as follows:
Subdivision 1. Inventions not related to employment.
Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of the employees rights in an invention to the employer shall not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employees own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employers actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer. Any provision which purports to apply to such an invention is to that extent against the public policy of this state and is to that extent void and unenforceable.
Subdivision 2. Effect of subdivision 1.
No employer shall require a provision made void and unenforceable by subdivision 1 as a condition of employment or continuing employment.
Subdivision 3. Notice to employee.
If an employment agreement entered into after August 1, 1977 contains a provision requiring the employee to assign or offer to assign any of the employees rights in any invention to an employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention for which no equipment, supplies, facility or trade secret information of the employer was used and which was developed entirely on the employees own time, and (1) which does not relate (a) directly to the business of the employer or (b) to the employers actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by the employee for the employer.
[EXHIBIT B
SPOUSAL CONSENT
As the undersigned spouse of the Optionee, I hereby acknowledges that I have read that certain Non-Qualified Stock Option Agreement by and between my spouse and the Company and dated as of [ ], 2012 (the Agreement), and that I understand its contents. I am aware that the Agreement (together with the Stockholders Agreement) provides for the repurchase of the shares of Common Stock subject to my spouses Option under certain circumstances and imposes other restrictions on the transfer of such shares. I agree that my spouses interest in the Option and the shares of Common Stock subject to such Option are subject to the Agreement and any interest I may have in such Option and the shares of Common Stock subject to such Option shall be irrevocably bound by the Agreement and further that my community property interest, if any, shall be similarly bound by the Agreement.
I am aware that the legal, financial and other matters contained in the Agreement are complex and I am free to seek advice with respect thereto from independent counsel. I have either sought such advice or determined after carefully reviewing the Agreement and the Plan that I will waive such right.
Capitalized terms used in this consent and not defined herein shall have the meanings given to such terms in the Agreement.
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Witness](3) |
NY\5881700.1 Even though the employee meets the burden of proving the conditions specified in this section, the employee shall disclose, at the time of employment or thereafter, all inventions being developed by the employee, for the purpose of determining employer and employee rights in an invention.tinuing emp
(3) To be included in options grants to employees located in California and other community property jurisdictions. Remove for employees in non-community property jurisdictions.
Exhibit 10.3
The CORPORATEplan for RetirementSM
EXECUTIVE PLAN
Adoption Agreement
IMPORTANT NOTE
This document has not been approved by the Department of Labor, the Internal Revenue Service or any other governmental entity. An Employer must determine whether the plan is subject to the Federal securities laws and the securities laws of the various states. An Employer may not rely on this document to ensure any particular tax consequences or to ensure that the Plan is unfunded and maintained primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees under the Employee Retirement Income Security Act with respect to the Employers particular situation. Fidelity Management Trust Company, its affiliates and employees cannot and do not provide legal or tax advice or opinions in connection with this document. This document does not constitute legal or tax advice or opinions and is not intended or written to be used, and it cannot be used by any taxpayer, for the purposes of avoiding penalties that may be imposed on the taxpayer. This document must be reviewed by the Employers attorney prior to adoption.
Plan Number: 44257 |
ECM NQ 2007 AA |
(07/2007) |
03/25/2011 |
© 2007 Fidelity Management & Research Company |
1.05 CONTRIBUTIONS ON BEHALF OF EMPLOYEES
(a) Deferral Contributions (Complete all that apply):
(1) x Deferral Contributions. Subject to any minimum or maximum deferral amount provided below, the Employer shall make a Deferral Contribution in accordance with, and subject to, Section 4.01 on behalf of each Participant who has an executed salary reduction agreement in effect with the Employer for the applicable calendar year (or portion of the applicable calendar year).
Deferral Contributions |
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%Amount |
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1 |
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50 |
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(Note: With respect to each type of Compensation, list the minimum and maximum dollar amounts or percentages as whole dollar amounts or whole number percentages.)
(2) x Deferral Contributions with respect to Bonus Compensation only. The Employer requires Participants to enter into a special salary reduction agreement to make Deferral Contributions with respect to one or more Bonuses, subject to minimum and maximum deferral limitations, as provided in the table below.
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(Note: With respect to each type of Bonus, list the minimum and maximum dollar amounts or percentages as whole dollar amounts or whole number percentages. In the event a bonus identified as a Performance-based Bonus above does not constitute a Performance-based Bonus with respect to any Participant, such Bonus will be treated as a Non-Performance-based Bonus with respect to such Participant.)
(b) Matching Contributions (Choose (1) or (2) below, and (3) below, as applicable):
(l) x The Employer shall make a Matching Contribution on behalf of each Employee Participant in an amount described below:
(A) o % of the Employee Participants Deferral Contributions for the calendar year.
(B) o The amount, if any, declared by the Employer in writing, which writing is hereby incorporated herein.
(C) xOther: In any percentage, as determined by the Employer in its sole discretion from time to time, which percentage may be zero. A participant who makes Deferral Contributions during the Plan Year under Section 1.05(a) shall be entitled to Matching Contributions for that Plan Year if the Participant (i) is employed by the Employer on the last day of the Plan Year; and (ii) earns at least 1,000 Hours of Service During the Plan Year.
(2) o Matching Contribution Offset. For each Employee Participant who has made elective contributions (as defined in 26 CFR section 1.401(k)-6 (QP Deferrals)) of the maximum permitted under Code section 402(g), or the maximum permitted under the terms of the Plan (the QP), to the QP, the Employer shall make a Matching Contribution in an amount equal to (A) minus (B) below:
(A) The matching contributions (as defined in 26 CFR section 1.40l(m)-l(a)(2) (QP Match)) that the Employee Participant would have received under the QP on the sum of the Deferral Contributions and the Participants QP Deferrals, determined as though
· no limits otherwise imposed by the tax law applied to such QP match; and
· the Employee Participants Deferral Contributions had been made to the QP.
(B) The QP Match actually made to such Employee Participant under the QP for the applicable calendar year.
Provided, however, that the Matching Contributions made on behalf of any Employee Participant pursuant to this Section 1.05(b)(2) shall be limited as provided in Section 4.02 hereof.
(3) o Matching Contribution Limits (Check the appropriate box (es)):
(A) o Deferral Contributions in excess of % of the Employee Participants Compensation for the calendar year shall not be considered for Matching Contributions.
(B) o Matching Contributions for each Employee Participant for each calendar year shall be limited to $ .
(c) Employer Contributions
(1) o Fixed Employer Contributions. The Employer shall make an Employer Contribution on behalf of each Employee Participant in an amount determined as described below:
(2) x Discretionary Employer Contributions. The Employer may make Employer Contributions to the accounts of Employee Participants in any amount (which amount may be zero), as determined by the Employer in its sole discretion from time to time in a writing, which is hereby incorporated herein.
AMENDMENT EXECUTION PAGE
(Fidelitys Copy)
Plan Name: |
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The Container Store Non-Qualified Retirement Plan (the Plan) |
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Employer: |
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The Container Store Inc. |
(Note: These execution pages are to be completed in the event the Employer modifies any prior election(s) or makes a new election(s) in this Adoption Agreement. Attach the amended page(s) of the Adoption Agreement to these execution pages.)
The following section(s) of the Plan are hereby amended effective as of the date(s) set forth below:
Section Amended |
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Effective Date |
1.05(a)(2) |
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05/01/2011 |
IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed on the date below.
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Employer: |
The Container Store |
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By: |
/s/ Claudine Tudgay |
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Title: |
Payroll Director |
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Date: |
3/28/2011 |
AMENDMENT EXECUTION PAGE
(Employers Copy)
Plan Name: |
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The Container Store Non-Qualified Retirement Plan (the Plan) |
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Employer: |
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The Container Store Inc. |
(Note: These execution pages are to be completed in the event the Employer modifies any prior election(s) or makes a new election(s) in this Adoption Agreement. Attach the amended page(s) of the Adoption Agreement to these execution pages.)
Section Amended |
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Effective Date |
1.05(a)(2) |
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05/01/2011 |
IN WITNESS WHEREOF, the Employer has caused this Amendment to be executed on the date below.
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Employer: |
The Container Store |
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By: |
/s/ Claudine Tudgay |
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Title: |
Payroll Director |
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Date: |
3/28/2011 |
Exhibit 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the Agreement) is entered into on October 31, 2012, and effective as of August 15, 2012 (the Effective Date), by and between Kip Tindell (the Executive) and TCS Holdings, Inc., a Delaware corporation (Parent), and any of its subsidiaries and affiliates as may employ the Executive from time to time (collectively, and together with any successor thereto, the Company).
RECITALS
WHEREAS, the Company and the Executive are currently parties to that certain Employment Agreement, dated as of August 16, 2007, as amended (the Prior Agreement);
WHEREAS, the Company desires to assure itself of the continued services of the Executive by engaging the Executive to perform services on the terms and subject to the conditions set out in this Agreement;
WHEREAS, the Executive desires to provide services to the Company on the terms and subject to the conditions set out in this Agreement; and
WHEREAS, the Company and the Executive desire to enter into this Agreement and this Agreement shall supersede the Prior Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I.
DEFINED TERMS
1.1 Previously Defined Terms. As used herein, each term defined in the first paragraph and recitals of this Agreement shall have the meaning set forth above.
1.2 Definitions. As used herein, the following terms shall have the following respective meanings:
(a) Affiliate means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. As used in the preceding sentence, control has the meaning given such term under Rule 405 of the Securities Act of 1933, as amended.
(b) Annual Base Salary has the meaning set forth in Section 3.1.
(c) Annual Bonus has the meaning set forth in Section 3.2.
(d) Board means the Board of Directors of the Parent.
(e) The Company shall have Cause to terminate the Executives employment hereunder upon the occurrence of any one or more of the following events: (i) a material breach by the Executive of any material provision of this Agreement which is not corrected by the Executive within thirty (30) days after receipt of written notice from the Company specifying such breach, to the extent such breach is capable of cure; (ii) the Executives conviction of, or entry by the Executive of a guilty or nolo contendere plea to, the commission of a felony or a crime involving moral turpitude, other than vicarious liability or traffic violations; (iii) the Executives intentional breach of Company policies constituting theft or embezzlement from the Company or any of its customers or suppliers; or (iv) the Executives gross neglect or intentional misconduct in connection with the performance of any material portion of the Executives duties (which, in the case of the Executives gross neglect, is not corrected by the Executive within thirty (30) days after receipt of written notice from the Company specifying such neglect, to the extent that such neglect is capable of cure).
(f) Change in Control means the occurrence of any of the following events: (i) a change in ownership or control of Parent effected through a transaction or series of transactions (other than an offering of equity securities of Parent or any of its subsidiaries to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) (other than Parent, any of its subsidiaries, any employee benefit plan maintained by Parent or any of its subsidiaries, any Principal Stockholder or any person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Parent or a Principal Stockholder) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of Parent possessing more than fifty percent (50%) of the total combined voting power of Parents securities outstanding immediately after such acquisition; (ii) individuals who, as of the Effective Date, constitute the Board (the Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election by Parents stockholders, or nomination for election by the Board, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) the consummation by Parent (whether directly involving Parent or indirectly involving Parent through one or more intermediaries) of a sale or other disposition of all or substantially all of Parents assets, other than a transaction which results in Parents voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Parent or the person that, as a result of the transaction, controls, directly or indirectly, Parent or owns, directly or indirectly, all or substantially all of Parents assets or otherwise succeeds to the business of Parent (Parent or such person, the Successor Entity)) directly or indirectly, at least a majority of the combined voting power of the Successor Entitys outstanding voting securities immediately after the transaction.
(g) Compensation Committee means the Compensation Committee of the Board.
(h) Competitive Business has the meaning set forth in Section 6.1.
(i) Continuation Period has the meaning set forth in Section 5.2(a).
(j) Date of Termination means: (i) if the Executives employment is terminated by his death, the date of his death; (ii) if the Executives employment is terminated pursuant to Sections 4.1(b)(g), either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4.2, whichever is earlier; or (iii) if the Executives employment is terminated due to the expiration of the Term under Section 2.2, the date of expiration of the then-current Term.
(k) Disability Continuation Period has the meaning set forth in Section 5.3.
(l) Fiscal Year means the fiscal year of the Company, as in effect from time to time.
(m) The Executive shall have Good Reason to resign from his employment hereunder upon the occurrence of any one or more of the following events without his prior written consent: (i) an adverse change in the Executives title or reporting line or the Executives material duties, authorities or responsibilities; (ii) the assignment to the Executive of duties materially inconsistent with his position; (iii) a material breach by the Company of any material provision of this Agreement; (iv) a reduction of the Executives Annual Base Salary or benefits hereunder (other than any such reduction which is part of, and generally consistent with, a general reduction affecting other similarly situated executives of the Company) or Annual Bonus opportunity (it being understood that the Performance Targets shall be determined annually by the Board); (v) failure of the Company to pay any portion of the Annual Base Salary or Annual Bonus otherwise payable to the Executive or to provide the benefits set forth in Section 3.3 (other than as provided in clause (iv) above); (vi) the Companys requiring the Executive to be headquartered at any office or location more than fifty (50) miles from Coppell, Texas, except for required travel on the Companys business to an extent substantially consistent with the Executives present business travel obligations; or (vii) the termination of the employment of either Sharon Tindell or Melissa Reiff by the Company without Cause or by such executive for Good Reason (each such term as defined in the applicable executives employment agreement); provided, however, that notwithstanding any of the foregoing the Executive may not resign from his employment for Good Reason unless: (A) the Executive provides the Company with at least sixty (60) days prior written Notice of Termination of his intent to resign for Good Reason and (B) the Company has not corrected the circumstances constituting Good Reason prior to the Date of Termination specified in the Notice of Termination; provided that such Notice of Termination may not be given later than ninety (90) days after the initial occurrence of the event constituting Good Reason; provided, further, that notwithstanding anything herein to the contrary, a termination of employment by the Executive for any reason pursuant to a Notice of Termination given during the thirty (30) day period immediately following the six (6)-month anniversary of the occurrence of a Change in Control shall be deemed to be termination of employment for Good Reason.
(n) Health Gross-Up Payment means an additional amount equal to the federal, state and local income and payroll taxes that the Executive incurs on each monthly Health Payment.
(o) Health Payment means the monthly premium amount paid by the Executive pursuant to Section 5.2(a), 5.2(b) or 5.3, as applicable.
(p) Incumbent Board has the meaning set forth in Section 1.2(f).
(q) Initial Term has the meaning set forth in Section 2.2.
(r) Notice of Termination has the meaning set forth in Section 4.2.
(s) Performance Target has the meaning set forth in Section 3.2.
(t) Person means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
(u) Principal Stockholders means Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., and any Affiliate thereof.
(v) Proprietary Information has the meaning set forth in Section 7.1.
(w) Related Agreements has the meaning set forth in Section 9.5.
(x) Restricted Period has the meaning set forth in Section 6.1.
(y) Retirement Continuation Period has the meaning set forth in Section 5.2(b).
(z) Section 409A means Section 409A of the United States Internal Revenue Code of 1986, as amended, and the Department of Treasury regulations and other interpretive guidance issued with respect thereto.
(aa) Successor Entity has the meaning set forth in Section 1.2(f).
(bb) Target Total Compensation has the meaning set forth in Section 3.2.
(cc) Term has the meaning set forth in Section 2.2.
(dd) Type I Disability means the Executives incapacity to perform the essential duties of his position for any six (6) months (whether or not consecutive) during any twelve (12) month period due to the Executives physical or mental illness, as determined by a physician mutually acceptable to, and agreed to in good faith by, a majority of the Board and the Executive.
(ee) Type II Disability means the Executives substantial incapacity to perform the essential duties of his position for any three (3) months (whether or not consecutive)
during any twelve (12) month period due to the Executives physical or mental illness, as determined by a physician mutually acceptable to, and agreed to in good faith by, a majority of the Board and the Executive.
ARTICLE II.
EMPLOYMENT
2.1 Employment of Executive. The Company hereby agrees to employ the Executive, and the Executive agrees to enter into the employ of the Company, on the terms and subject to the conditions herein provided.
2.2 Term. The term of employment under this Agreement (the Initial Term) shall be for the period beginning on the Effective Date and ending on the fifth (5th) anniversary thereof, unless earlier terminated as provided in Section 4.1. On the fifth (5th) anniversary of the Effective Date and on each subsequent anniversary of the Effective Date, the employment term hereunder shall automatically be extended for successive one (1)-year periods (such periods, together with the Initial Term, the Term), unless either the Executive or the Company elects not to so extend the Term by notifying the other party in writing of such election no later than ninety (90) days prior to the last day of the then-current Term.
2.3 Position and Duties. During the Term, the Executive shall serve as the Companys Chief Executive Officer with such customary responsibilities, duties and authority as may from time to time be assigned to the Executive by the Board. Such duties, responsibilities and authority may include services for one or more subsidiaries or Affiliates of the Company. The Executive shall report directly to the Board. The Executive shall devote substantially all his working time and efforts to the business and affairs of the Company. In addition, during the five (5)-year period immediately following the expiration of the Term, the Company shall use its best efforts to cause the Executive to be nominated and elected as Chairman of the Board; provided, however, that the Company shall not be so obligated if Cause exists for the removal of the Executive from the Board or for the failure to nominate or elect the Executive to the Board; provided, further, that if the Executive is so nominated and elected, the Executive hereby agrees to serve as Chairman of the Board. The Executive agrees to observe and comply with the Companys rules and policies, as the same may be adopted and amended from time to time.
ARTICLE III.
COMPENSATION AND RELATED MATTERS
3.1 Annual Base Salary. During the Term, the Executive shall receive a base salary at an initial rate of $675,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review annually for possible increase, but not decrease, in the Boards discretion (the Annual Base Salary).
3.2 Annual Bonus. With respect to each Fiscal Year that ends during the Term, commencing with Fiscal Year 2012, the Executive shall be eligible to receive an annual cash bonus (the Annual Bonus) based upon Company annual EBITDA and/or other financial and non-financial performance targets (the Performance Targets), established by the Board. The amount of the Annual Bonus shall be based upon the Companys attainment of the Performance
Targets, as determined by the Board (or any authorized committee of the Board). Notwithstanding anything herein to the contrary, with respect to each subsequent Fiscal Year that ends during the Term, commencing with Fiscal Year 2012, the sum of the Annual Base Salary and the target Annual Bonus (the Target Total Compensation) for any such Fiscal Year shall be no less than the Target Total Compensation for the immediately preceding Fiscal Year. See Exhibit A for actual historical Annual Base Salary, target Annual Bonus and Target Total Compensation. Each such Annual Bonus shall be payable within thirty (30) days following the completion of the audited financials for the Fiscal Year to which such Annual Bonus relates, but in any event within the period required by Section 409A, such that it qualifies as a short-term deferral pursuant to Section 1.409A-1(b)(4) of the Department of Treasury Regulations. Notwithstanding the foregoing, except as set forth in Article V, no bonus shall be payable with respect to any Fiscal Year unless the Executive remains continuously employed with the Company during the period beginning on the Effective Date and ending on the last day of such Fiscal Year. To the extent that the Company becomes subject to Section 162(m) of the Code (and all applicable post-initial public offering transition periods have expired with respect to applicable Company plans), the Annual Bonus for any applicable fiscal year will be payable pursuant to a qualified performance-based compensation bonus plan that has been approved by the stockholders of the Company in accordance with the provisions for such approval under Section 162(m) of the Code and the regulations promulgated thereunder, and on the basis of the Executives or the Companys attainment of objective financial or other operating criteria established by the Compensation Committee in its sole good faith discretion and in accordance with Section 162(m) of the Code and the regulations promulgated thereunder.
3.3 Benefits. During the Term, the Executive shall be entitled to the following benefits: (a) participation in the Companys employee health and welfare benefit plans and programs and arrangements which are applicable to the Companys senior executives as may be adopted by the Company from time to time, subject to the terms and conditions of the applicable employee benefit plan, program or arrangement, and (b) indemnification and/or directors and officers liability insurance coverage insuring the Executive against insurable events which occur while the Executive is a director or executive officer of the Company, on terms and conditions that are comparable to those then provided to other current or former directors or executive officers of the Company.
3.4 Vacation and Holidays. During the Term, the Executive shall be entitled to paid vacation and holidays in accordance with the Companys policies applicable to senior executives of the Company, provided that the Executive shall be entitled to paid vacation of no less than four (4) weeks for each full Fiscal Year during the Term. Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive.
3.5 Expenses. During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties to the Company in accordance with the Companys expense reimbursement policy.
ARTICLE IV.
TERMINATION
4.1 Circumstances. During the Term, the Executives employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:
(a) Death. The Executives employment hereunder shall terminate upon his death.
(b) Type I Disability. If the Executive has incurred a Type I Disability, the Company may terminate the Executives employment due thereto.
(c) Termination for Cause. The Company may terminate the Executives employment for Cause.
(d) Termination without Cause. The Company may terminate the Executives employment without Cause.
(e) Resignation for Good Reason. The Executive may resign from his employment for Good Reason.
(f) Resignation without Good Reason. The Executive may resign from his employment without Good Reason.
(g) Resignation due to Type II Disability. The Executive may resign from his employment due to Type II Disability.
4.2 Notice of Termination. Any termination of the Executives employment by the Company or by the Executive pursuant to Section 4.1 (other than termination due to death pursuant to Section 4.1(a)) shall be communicated by a written notice to the other party hereto. Such written notice (a Notice of Termination) shall: (a) indicate the specific termination provision in this Agreement relied upon; and (b) specify a Date of Termination which, (i) if submitted by the Executive, shall be at least sixty (60) days, but no more than six (6) months, following the date of such notice and (ii) if submitted by the Company in connection with a termination of employment by the Company without Cause, shall be at least thirty (30) days following the date of such notice. Notwithstanding the foregoing, the Company may, in its sole discretion, change the Executives proposed Date of Termination to any date following the Companys receipt of the Executives Notice of Termination (even if such date is prior to the date specified in such Notice of Termination). A Notice of Termination submitted by the Company in connection with a termination of employment by the Company for Cause may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter chosen by the Company in its sole discretion; provided that, notwithstanding the foregoing, any Notice of Termination submitted by the Company in connection with a termination of the Executives employment for Cause within the meaning of Section 1.2(e)(i) (due to the Executives material breach of any material provision of this Agreement) or Section 1.2(e)(iv) (due to the Executives gross neglect in connection with the performance of any material portion of the Executives duties) shall indicate a Date of
Termination that is at least thirty (30) days following the date of such notice, provided that such breach is capable of cure. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause, Good Reason, Type I Disability or Type II Disability shall not waive any right of the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Companys or the Executives rights hereunder; provided that a Notice of Termination submitted by the Executive of his intent to resign for Good Reason may not be given later than 90 days after the initial occurrence of the event constituting Good Reason.
4.3 Company Obligations upon Termination. Upon termination of the Executives employment, the Executive (or the Executives estate) shall be entitled to receive: (a) any amount of the Annual Base Salary through the Date of Termination not theretofore paid; (b) any reimbursement of expenses owing to the Executive under Section 3.5; (c) any accrued vacation pay owed to the Executive pursuant to Section 3.4; and (d) any amount arising from the Executives participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3.3, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements (including, if applicable, any death benefits). Except as otherwise set forth in Sections 5.1 through 5.3 below, the payments and benefits described in this Section 4.3 shall be the only payments and benefits payable in the event of the Executives termination of employment for any reason (other than, for the avoidance of doubt, any payments or benefits to which the Executive is entitled by virtue of his being a stockholder of the Company). The amounts in subsections (a)-(c) above shall be paid within sixty (60) days after the Executives termination, but in any event within the period required by Section 409A, such that it qualifies as a short-term deferral pursuant to Section 1.409A-1(b)(4) of the Department of Treasury Regulations.
ARTICLE V.
SEVERANCE PAYMENTS
5.1 Termination due to Death. If the Executives employment is terminated pursuant to Section 4.1(a) due to the Executives death, then, notwithstanding the last sentence of Section 3.2, in addition to the amounts set forth in Section 4.3, (a) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (b) the Company shall pay to the Executive (or the Executives estate) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent he remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs).
5.2 Termination without Cause; Resignation for Good Reason or without Good Reason; Due to Type I Disability.
(a) If (i) the Executives employment is terminated by the Company without Cause pursuant to Section 4.1(d) or due to Type I Disability pursuant to Section 4.1(b), or (ii) the Executive resigns from his employment for Good Reason pursuant to Section 4.1(e) (other than due to the occurrence of an event described in Section 1.2(m)(vii)), then in addition to the amounts set forth in Section 4.3, (A) the Company shall pay the Executive an amount equal to the sum of (x) two (2) times the Annual Base Salary as in effect immediately prior to the Date of Termination, payable in equal installments, in accordance with the Companys payroll practices, during the two (2)-year period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, and (y) two (2) times the greater of (I) the Annual Bonus earned by the Executive for the Fiscal Year immediately prior to Fiscal Year in which the Date of Termination occurs, and (II) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent he remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs), (B) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (C) during the two (2)-year period beginning on the Date of Termination (such period, the Continuation Period), the Executive and his eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which he and his eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plans, the Company shall provide to the Executive and his eligible dependents, if applicable, substantially similar benefits during the Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-Up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Companys group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-1(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a
manner that complies with the requirements of Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations.
(b) Notwithstanding the foregoing, if (i) the Executive resigns from his employment for Good Reason due to the occurrence of an event described in Section 1.2(m)(vii) or (ii) on or after the fourth (4th) anniversary of the Effective Date, the Executive resigns from his employment without Good Reason, then in addition to the amounts set forth in Section 4.3, (A) the Company shall pay the Executive an amount equal to the sum of (x) the Annual Base Salary as in effect immediately prior to the Date of Termination, payable in equal installments, in accordance with the Companys payroll practices, during the one (1)-year period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, (y) the amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent he remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets, payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which the Date of Termination occurs) and (z) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent he remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs), (B) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (C) during the one (1) year period beginning on the Date of Termination (such period, the Retirement Continuation Period), the Executive and his eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which he and his eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plan, the Company shall provide to the Executive and his eligible dependents, if applicable, substantially similar benefits during the Retirement Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-Up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation
coverage under the Companys group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-1(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations.
5.3 Termination due to Type II Disability. If the Executive resigns from his employment due to Type II Disability pursuant to Section 4.1(g), then in addition to the amounts set forth in Section 4.3, (a) the Company shall pay the Executive an amount equal to the sum of (i) one and one-half (1.5) times the Annual Base Salary as in effect immediately prior to the Date of Termination, payable in equal installments, in accordance with the Companys payroll practices, during the eighteen (18)-month period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, and (ii) one and one-half (1.5) times the greater of (A) the Annual Bonus earned by the Executive for the Fiscal Year immediately prior to Fiscal Year in which the Date of Termination occurs, and (B) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent he remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which the Date of Termination occurs), (b) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (c) during the eighteen (18)-month period beginning on the Date of Termination (such period, the Disability Continuation Period), the Executive and his eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which he and his eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plans, the Company shall provide to the Executive and his eligible dependents, if applicable, substantially similar benefits during the Disability Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Companys group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-
1(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations.
5.4 Section 409A. Notwithstanding any provision to the contrary in this Agreement, no cash payments or other benefits described in Section 5.2 or 5.3 will be paid or made available to the Executive unless the Executives termination of employment constitutes a separation from service within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations, and unless, on or prior to the thirtieth (30th) day following the Date of Termination, (a) the Executive shall have executed a waiver and release of claims in the form attached as Exhibit B hereto, and (b) such release shall not have been revoked by the Executive prior to such thirtieth (30th) day. Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed at the time of his separation from service to be a specified employee for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion of the Executives termination benefits shall not be provided to the Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executives separation from service with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A of the Code) or (ii) the date of the Executives death. Upon the expiration of the applicable deferral period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to Section 5.2 or 5.3 shall be paid in a lump sum to the Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided herein. For the avoidance of doubt, no payments or benefits shall be payable under Section 5.2 or 5.3 in the event of the Executives termination of employment due to expiration of the Term under Section 2.2.
5.5 Survival. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.
ARTICLE VI.
NON-COMPETITION; NON-SOLICITATION
6.1 Non-Competition Obligation. The Executive shall not, at any time during the period commencing on the Effective Date and ending on the second (2nd) anniversary of the Date of Termination (the Restricted Period), directly or indirectly, enter the employ of, or render any services to, any Person engaged in any business in North America or anywhere in the world in which the Company conducts business as of the Date of Termination (a) which derives more than fifteen percent (15%) of its consolidated revenues from the marketing or distribution of products sold by the Company, (b) which participates in the manufacturing or design of modular or component shelving or drawer systems or other material products of Elfa Group AB and its subsidiaries, or (c) which, as of the Date of Termination, the Board (including any committee thereof) or senior management of the Company has taken active steps to engage in or acquire (any such business, a Competitive Business); and the Executive shall not become interested in any such Competitive Business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other
relationship or capacity; provided, however, that nothing contained in this Section 6.1 shall be deemed to prohibit the Executive from working for another retail organization, provided that the Executive is not engaged in any aspect of the business of such retail organization (including, but not limited to, starting any division or other segment of such retail organization in a Competitive Business), whether in a supervisory, consultative or other capacity, relating to a Competitive Business. For the avoidance of doubt, the Executives position as a senior executive officer of a retail organization, of which a Competitive Business is an immaterial aspect of its general retail business, shall not be prohibited by, or constitute a violation of, the terms of this Section 6.1; provided that the Executive does not participate in any day-to-day operations or in any strategic or other decisions relating to the conduct of such retail organization as it relates to a Competitive Business and, to the extent necessary, has delegated such responsibilities to other management personnel of such retail organization. It is expressly agreed that nothing contained in this Section 6.1 shall be deemed to prohibit the Executive from acquiring, solely as an investment, up to five percent (5%) of the outstanding shares of capital stock of any public corporation or working for a retail organization, provided that the Executive is not, directly or indirectly, engaged in a business relating to a Competitive Business.
6.2 Non-Solicitation Obligation. The Executive shall not, at any time during the Restricted Period, for his benefit or for the benefit of any other Person, solicit the employment or services of, or hire (or cause any Person to so solicit or hire), any person who upon the termination of the Executives employment hereunder, or within twelve (12) months prior thereto, was (a) employed by the Company or (b) a consultant to the Company. The restrictions in this Section 6.2 shall not apply to (i) general solicitations that are not specifically directed to employees of or consultants to the Company, (ii) at the request of a former employee, serving as an employment reference for such former employee, (iii) solicitations or hirings of former employees of the Company whose employment was terminated by the Company without Cause or who terminated their employment for Good Reason (as such terms are defined in the applicable employment agreement or, in the absence of such an agreement, as determined by a majority of the Board in its good faith discretion), or (iv) except as would constitute a breach of the covenants in Section 6.1, the solicitation or hiring of either Sharon Tindell or Melissa Reiff following such executives termination of employment by the Company without Cause or by such executive for Good Reason (as such terms are defined in the applicable employment agreement).
6.3 Definition. As used in this Article VI, the term Company shall include the Company (as defined in the preamble hereof) and any of its direct or indirect subsidiaries.
6.4 Amendment. The provisions contained in Sections 6.1 and 6.2 may be altered and/or waived only with the prior written consent of a majority of the Board or the Compensation Committee.
ARTICLE VII.
NONDISCLOSURE OF PROPRIETARY INFORMATION
7.1 Nondisclosure. Except as required in the faithful performance of the Executives duties hereunder or pursuant to Section 7.3, the Executive shall, during the Term and after the Date of Termination, maintain in confidence and shall not directly or indirectly, use,
disseminate, disclose or publish, or use for his benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Companys operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment (Proprietary Information), or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. The Executives obligation to maintain and not use, disseminate, disclose or publish, or use for his benefit or the benefit of any Person any Proprietary Information after the Date of Termination shall continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known and in the public domain (other than by means of the Executives direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee of the Company). Notwithstanding anything herein to the contrary, during the Term and following the Date of Termination, each of the Executive and the Company shall retain the right to use the seven Foundation Principles described in the Companys news release, dated as of January 10, 2005, (with Communication Is Leadership having been added in 2008) without payment of royalties or other consideration, and nothing in this Agreement shall have any effect on the ownership of such Foundation Principles as of the Effective Date.
7.2 Return of Proprietary Information. Upon termination of the Executives employment with the Company for any reason, the Executive shall promptly deliver to the Company all Proprietary Information in the Executives possession, including without limitation all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Companys customers, business plans, marketing strategies, products or processes.
7.3 Response to Legal Process; Authorship; Contents of Book. Notwithstanding Section 7.1, (a) the Executive may respond to a lawful and valid subpoena or other legal process relating to the Company or its business or operations; provided that the Executive shall: (i) give the Company the earliest possible notice thereof; (ii) as far in advance of the return date as possible, at the Companys sole cost and expense, make available to the Company and its counsel the documents and other information sought; and (iii) at the Companys sole cost and expense, assist such counsel in resisting or otherwise responding to such process, and (b) the disclosure of information, including Proprietary Information, in the Book (as defined in the Indemnification and Hold Harmless Agreement by and between Parent and the Executive, dated as of June 13, 2012) currently being authored by the Executive shall not violate or constitute a breach of this Agreement.
7.4 Non-Disparagement.
(a) The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, members or Affiliates, either orally or in writing, at any time; provided that the Executive may confer in confidence with his legal representatives and make truthful statements as required by law.
(b) The Company agrees to instruct the members of the Board and the executive officers of the Company not to disparage the Executive, either orally or in writing, at any time; provided that the Company may confer in confidence with its legal representatives and make truthful statements as required by law.
7.5 As used in this Article VII, the term Company shall include the Company (as defined in the preamble hereof), its parent, related entities, and any of its direct or indirect subsidiaries.
ARTICLE VIII.
REMEDIES
8.1 Acknowledgement; Blue Pencil. The Executive acknowledges and agrees that the benefits and payments provided under this Agreement represent adequate consideration for the Executives agreement to be bound by the restrictive covenants set forth in Articles VI and VII, that the Executives agreement to be bound by such restrictive covenants is a material inducement to the Companys entering into this Agreement. In the event, however, that any restrictive covenant set forth in Articles VI or VII shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it is the intention of the Executive and Company that it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.
8.2 Injunctive Relief. The Executive acknowledges and agrees that a breach of the covenants contained in Articles VI or VII will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Articles VI or VII, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief with any requirement to post a bond. The Company acknowledges and agrees that a breach of the covenants contained in Section 7.4(b) will cause irreparable damage to the Executive, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Company agrees that in the event of a breach of any of the covenants contained in Section 7.4(b), in addition to any other remedy which may be available at law or in equity, the Executive will be entitled to specific performance and injunctive relief without any requirement to post a bond.
ARTICLE IX.
MISCELLANEOUS
9.1 Assignment. The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates. The Executive may not assign his rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.
9.2 Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without reference to the principles of conflicts of law of New York or any other jurisdiction, and where applicable, the laws of the United States.
9.3 Notices. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows:
(a) If to the Company:
TCS Holdings, Inc.
500 Freeport Parkway
Coppell, TX 75019
ATTN: Melissa Reiff, President
with a copy to:
Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
ATTN: Timothy Flynn
and a copy to:
Latham & Watkins LLP
885 Third Avenue
Suite 1000
New York, NY 10022
ATTN: Howard Sobel; Bradd Williamson
(b) If to the Executive, to the address set forth in the Companys records
or at any other address as any party shall have specified by notice in writing to the other party.
9.4 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
9.5 Entire Agreement. The terms of this Agreement, the other agreements and instruments contemplated hereby or referred to herein, the Stockholders Agreement dated as of August 16, 2007, by and among Parent and the stockholders of Parent, and the Contribution and Subscription Agreement dated as of August 16, 2007, by and among Parent and certain stockholders of The Container Store, Inc., each as may be amended from time to time (collectively, the Related Agreements), are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of (and supersede) any prior or contemporaneous agreement (including without limitation the Prior Agreement and any term sheet or similar agreement entered into between the Company and the Executive). The parties further intend that this Agreement and the Related Agreements shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement and the Related Agreements.
9.6 Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company and approved by a majority of the Board, which expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and approved by a majority of the Board, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or conform. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.
9.7 No Inconsistent Action. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.
9.8 Construction. This Agreement shall be deemed drafted equally by both the parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary: (a) the plural includes the singular and the singular includes the plural; (b) and and or are each used both conjunctively and disjunctively; (c) any, all, each, or every means any and all, and each and every; (d) includes and including are each without limitation; (e) herein, hereof, hereunder and other similar compounds of the word here refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.
9.9 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before an arbitrator in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction. Notwithstanding the foregoing, (a) the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Articles VI or VII of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without requiring the Company to post a bond, and (b) the Executive shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Section 7.4(b) of this Agreement and the Company hereby consents that such restraining order or injunction may be granted without requiring the Executive to post a bond. Only individuals who are: (i) lawyers engaged full-time in the practice of law and (ii) on the AAA register of arbitrators shall be selected as an arbitrator. Within twenty (20) days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law. It is mutually agreed that the written decision of the arbitrator shall be valid, binding, final and non-appealable, provided, however, that the parties hereto agree that the arbitrator shall not be empowered to award punitive damages against any party to such arbitration. The arbitrator shall require the non-prevailing party to pay the arbitrators full fees and expenses or, if in the arbitrators opinion there is no prevailing party, the arbitrators fees and expenses shall be borne equally by the parties thereto. In the event action is brought to enforce the provisions of this Agreement pursuant to this Section 9.9, the non-prevailing parties shall be required to pay the reasonable attorneys fees and expenses of the prevailing parties, except that if in the opinion of the court or arbitrator deciding such action there is no prevailing party, each party shall pay its own attorneys fees and expenses.
9.10 Enforcement. In the event any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect: (a) such provision shall be fully severable; (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a portion of this Agreement; and (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by such invalid, illegal or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such invalid, illegal or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in substance to such invalid, illegal or unenforceable provision as may be possible and be valid, legal and enforceable.
9.11 Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.
9.12 Employee Acknowledgment. The Executive acknowledges that he has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on his own judgment.
9.13 Section 409A.
(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that a majority of the Board determines that any amounts payable pursuant to this Agreement may be subject to Section 409A, the Company may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to: (i) exempt such payments from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to such payments or (ii) comply with the requirements of Section 409A and thereby avoid the application of penalty taxes under Section 409A; provided that no such amendments, policies, procedures or actions shall reduce the economic value to the Executive of this Agreement from the value of this Agreement (without taking into account the effect of Section 409A) prior to the adoption or taking of such amendments, policies, procedures or actions. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or any of its Affiliates, employees or agents.
(b) To the extent that any installment payments under this Agreement are deemed to constitute nonqualified deferred compensation within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), each such payment that the Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.
(c) To the extent that any reimbursements or corresponding in-kind benefits provided to the Executive under this Agreement (including, without limitation, the Health Payment and the Health Gross-Up Payment) are deemed to constitute deferred compensation within the meaning of Section 409A to the Executive, such amounts shall be paid or reimbursed reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred, and in any event in accordance with Section 1.409A-3(i)(l)(iv) of the Department of Treasury Regulations. The amount of any such payments or expense reimbursements in one calendar year shall not affect the expenses or in-kind benefits eligible for payment or reimbursement in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and the Executives right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.
9.14 Cooperation. During the Term hereof and thereafter, the Executive shall cooperate with the Company in any disputes with third parties, internal investigations or administrative, regulatory or judicial proceedings as reasonably requested by the Company and at the Companys sole cost and expense (including, without limitation, the Executive being available to the Company upon reasonable notice for interviews and factual investigations, at times and on schedules that are reasonably consistent with the Executives other permitted activities and commitments).
9.15 Indemnification. To the maximum extent allowed under applicable law and the Companys By-Laws and other corporate organizational documents, in the event that the Executive is a party to any threatened, pending or completed action, suit or proceeding (other than any action, suit or proceeding arising under or related to this Agreement or any other compensation agreement), whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, the Company shall indemnify the Executive and hold him harmless against all expenses (including reasonable and documented attorneys fees and costs incurred by the Executive), judgments, fines and amounts paid in settlement (subject to the Companys consent, with such consent not to be unreasonably withheld) actually and reasonably incurred by him, as and when incurred, in connection with such action, suit or proceeding; provided that the Executive acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Executive did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, or that, with respect to any criminal action or proceeding, the Executive had reasonable cause to believe that his conduct was unlawful. The provisions of this Section 9.15 shall not be deemed exclusive of any other rights of indemnification to which the Executive may be entitled or which may be granted to him, and it shall be in addition to any rights of indemnification to which he may be entitled under any policy of insurance. These provisions shall continue in effect after Executive has ceased to be an officer or director of the Company.
9.16 No Mitigation. The Executive shall have no obligation to mitigate any payments due hereunder.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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TCS HOLDINGS, INC. | ||
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By: |
/s/ Tim Flynn | |
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Name: |
Tim Flynn |
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Title: |
President |
[TCS Amended and Restated Employment Agreement with Kip Tindell]
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EXECUTIVE | |
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By: |
/s/ Kip Tindell |
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Kip Tindell |
[TCS Amended and Restated Employment Agreement with Kip Tindell]
EXHIBIT A
Historical Base Compensation, Target Bonus Compensation and Target Total Compensation
Fiscal Year |
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Base Compensation |
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Target Annual |
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Target Total |
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2011 |
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$ |
663,000 |
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$ |
1,000,000 |
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$ |
1,663,000 |
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2012 |
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$ |
675,000 |
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$ |
1,038,000 |
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$ |
1,713,000 |
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EXHIBIT B
Form of Release Agreement
Kip Tindell (the Executive) agrees for the Executive, the Executives spouse and child or children (if any), the Executives heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, hereby forever to release, discharge, and covenant not to sue TCS Holdings, Inc., a Delaware corporation (the Company), the Companys past, present, or future parent, affiliated, related, and/or subsidiary entities, and all of their past and present directors, shareholders, officers, general or limited partners, employees, agents, and attorneys, and agents and representatives of such entities, and employee benefit plans in which the Executive is or has been a participant by virtue of his employment with the Company, from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected, which the Executive has or may have had against such entities based on any events or circumstances arising or occurring on or prior to (or, with respect to claims of disparagement, arising or occurring on or prior to the date this release (the Release) is executed), arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever, (a) Executives employment with the Company or the termination thereof or (b) Executives status at any time as a holder of any securities of the Company, and any and all claims based on, relating to, or arising under federal, state, or local laws, including without limitation claims of discrimination, harassment, retaliation, wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, liability in tort, or for violation of public policy, claims of any kind that may be brought in any court or administrative agency, any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Texas Commission on Human Rights Act, the Texas Anti-Retaliation Act, the Texas Labor Code, the Sarbanes-Oxley Act, and similar state or local statutes, ordinances, and regulations; provided, however, notwithstanding anything to the contrary set forth herein, that this general release shall not extend to (i) benefit claims under employee pension benefit plans in which the Executive is a participant by virtue of his employment with the Company or to benefit claims under employee welfare benefit plans for occurrences (e.g., medical care, death, or onset of disability) arising after the execution of this Release by the Executive, and (ii) any obligation under this Release, or under that certain Amended and Restated Employment Agreement entered into on October , 2012 by and between the Company and the Executive, assumed by any party thereto.
The Executive understands that this Release includes a release of claims arising under the Age Discrimination in Employment Act (ADEA). The Executive understands and warrants that he has been given a period of twenty-one (21) days to review and consider this Release and such period shall not be affected or extended by any changes, whether material or immaterial, that might be made to this Release. The Executive is hereby advised to consult with
an attorney prior to executing the Release. By his signature below, the Executive warrants that he has had the opportunity to do so and to be fully and fairly advised by that legal counsel as to the terms of this Release. The Executive further warrants that he understands that he may use as much or all of his twenty-one (21)-day period as he wishes before signing, and warrants that he has done so.
The Executive further warrants that he understands that he has seven (7) days after signing this Release to revoke the Release by notice in writing to . This Release shall be binding, effective, and enforceable upon both parties upon the expiration of this seven (7)-day revocation period without having received such revocation, but not before such time.
* * * * *
The Executive acknowledges and agrees that this Release is a legally binding document and the Executives signature will commit the Executive to its terms. Executive acknowledges and agrees that the Executive has carefully read and fully understands all of the provisions of this Release and that voluntarily enters into this Release by signing below. Upon execution, the Executive agree to deliver a signed copy of this Release to .
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Kip Tindell | |
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Date: |
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Exhibit 10.5
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the Agreement) is entered into on October 31, 2012, and effective as of August 15, 2012 (the Effective Date), by and between Sharon Tindell (the Executive) and TCS Holdings, Inc., a Delaware corporation (Parent), and any of its subsidiaries and affiliates as may employ the Executive from time to time (collectively, and together with any successor thereto, the Company).
RECITALS
WHEREAS, the Company and the Executive are currently parties to that certain Employment Agreement, dated as of August 16, 2007, as amended (the Prior Agreement);
WHEREAS, the Company desires to assure itself of the continued services of the Executive by engaging the Executive to perform services on the terms and subject to the conditions set out in this Agreement;
WHEREAS, the Executive desires to provide services to the Company on the terms and subject to the conditions set out in this Agreement; and
WHEREAS, the Company and the Executive desire to enter into this Agreement and this Agreement shall supersede the Prior Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I.
DEFINED TERMS
1.1 Previously Defined Terms. As used herein, each term defined in the first paragraph and recitals of this Agreement shall have the meaning set forth above.
1.2 Definitions. As used herein, the following terms shall have the following respective meanings:
(a) Affiliate means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. As used in the preceding sentence, control has the meaning given such term under Rule 405 of the Securities Act of 1933, as amended.
(b) Annual Base Salary has the meaning set forth in Section 3.1.
(c) Annual Bonus has the meaning set forth in Section 3.2.
(d) Board means the Board of Directors of the Parent.
(e) The Company shall have Cause to terminate the Executives employment hereunder upon the occurrence of any one or more of the following events: (i) a material breach by the Executive of any material provision of this Agreement which is not corrected by the Executive within thirty (30) days after receipt of written notice from the Company specifying such breach, to the extent such breach is capable of cure; (ii) the Executives conviction of, or entry by the Executive of a guilty or nolo contendere plea to, the commission of a felony or a crime involving moral turpitude, other than vicarious liability or traffic violations; (iii) the Executives intentional breach of Company policies constituting theft or embezzlement from the Company or any of its customers or suppliers; or (iv) the Executives gross neglect or intentional misconduct in connection with the performance of any material portion of the Executives duties (which, in the case of the Executives gross neglect, is not corrected by the Executive within thirty (30) days after receipt of written notice from the Company specifying such neglect, to the extent that such neglect is capable of cure).
(f) Change in Control means the occurrence of any of the following events: (i) a change in ownership or control of Parent effected through a transaction or series of transactions (other than an offering of equity securities of Parent or any of its subsidiaries to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) (other than Parent, any of its subsidiaries, any employee benefit plan maintained by Parent or any of its subsidiaries, any Principal Stockholder or any person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Parent or a Principal Stockholder) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of Parent possessing more than fifty percent (50%) of the total combined voting power of Parents securities outstanding immediately after such acquisition; (ii) individuals who, as of the Effective Date, constitute the Board (the Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election by Parents stockholders, or nomination for election by the Board, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) the consummation by Parent (whether directly involving Parent or indirectly involving Parent through one or more intermediaries) of a sale or other disposition of all or substantially all of Parents assets, other than a transaction which results in Parents voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Parent or the person that, as a result of the transaction, controls, directly or indirectly, Parent or owns, directly or indirectly, all or substantially all of Parents assets or otherwise succeeds to the business of Parent (Parent or such person, the Successor Entity)) directly or indirectly, at least a majority of the combined voting power of the Successor Entitys outstanding voting securities immediately after the transaction.
(g) Compensation Committee means the Compensation Committee of the Board.
(h) Competitive Business has the meaning set forth in Section 6.1.
(i) Continuation Period has the meaning set forth in Section 5.2(a).
(j) Date of Termination means: (i) if the Executives employment is terminated by her death, the date of her death; (ii) if the Executives employment is terminated pursuant to Sections 4.1(b)(g), either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4.2, whichever is earlier; or (iii) if the Executives employment is terminated due to the expiration of the Term under Section 2.2, the date of expiration of the then-current Term.
(k) Disability Continuation Period has the meaning set forth in Section 5.3.
(1) Fiscal Year means the fiscal year of the Company, as in effect from time to time.
(m) The Executive shall have Good Reason to resign from her employment hereunder upon the occurrence of any one or more of the following events without her prior written consent: (i) an adverse change in the Executives title or reporting line or the Executives material duties, authorities or responsibilities; (ii) the assignment to the Executive of duties materially inconsistent with her position; (iii) a material breach by the Company of any material provision of this Agreement; (iv) a reduction of the Executives Annual Base Salary or benefits hereunder (other than any such reduction which is part of, and generally consistent with, a general reduction affecting other similarly situated executives of the Company) or Annual Bonus opportunity (it being understood that the Performance Targets shall be determined annually by the Board); (v) failure of the Company to pay any portion of the Annual Base Salary or Annual Bonus otherwise payable to the Executive or to provide the benefits set forth in Section 3.3 (other than as provided in clause (iv) above); (vi) the Companys requiring the Executive to be headquartered at any office or location more than fifty (50) miles from Coppell, Texas, except for required travel on the Companys business to an extent substantially consistent with the Executives present business travel obligations; or (vii) the termination of the employment of either Kip Tindell or Melissa Reiff by the Company without Cause or by such executive for Good Reason (each such term as defined in the applicable executives employment agreement); provided, however, that notwithstanding any of the foregoing the Executive may not resign from her employment for Good Reason unless: (A) the Executive provides the Company with at least sixty (60) days prior written Notice of Termination of her intent to resign for Good Reason and (B) the Company has not corrected the circumstances constituting Good Reason prior to the Date of Termination specified in the Notice of Termination; provided that such Notice of Termination may not be given later than ninety (90) days after the initial occurrence of the event constituting Good Reason; provided, further, that notwithstanding anything herein to the contrary, a termination of employment by the Executive for any reason pursuant to a Notice of Termination given during the thirty (30) day period immediately following the six (6)-month anniversary of the occurrence of a Change in Control shall be deemed to be termination of employment for Good Reason.
(n) Health Gross-Up Payment means an additional amount equal to the federal, state and local income and payroll taxes that the Executive incurs on each monthly Health Payment.
(o) Health Payment means the monthly premium amount paid by the Executive pursuant to Section 5.2(a), 5.2(b) or 5.3, as applicable.
(p) Incumbent Board has the meaning set forth in Section 1.2(f).
(q) Initial Term has the meaning set forth in Section 2.2.
(r) Notice of Termination has the meaning set forth in Section 4.2.
(s) Performance Target has the meaning set forth in Section 3.2.
(t) Person means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
(u) Principal Stockholders means Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., and any Affiliate thereof.
(v) Proprietary Information has the meaning set forth in Section 7.1.
(w) Related Agreements has the meaning set forth in Section 9.5.
(x) Restricted Period has the meaning set forth in Section 6.1.
(y) Retirement Continuation Period has the meaning set forth in Section 5.2(b).
(z) Section 409A means Section 409A of the United States Internal Revenue Code of 1986, as amended, and the Department of Treasury regulations and other interpretive guidance issued with respect thereto.
(aa) Successor Entity has the meaning set forth in Section 1.2(f).
(bb) Target Total Compensation has the meaning set forth in Section 3.2.
(cc) Term has the meaning set forth in Section 2.2.
(dd) Type I Disability means the Executives incapacity to perform the essential duties of her position for any six (6) months (whether or not consecutive) during any twelve (12) month period due to the Executives physical or mental illness, as determined by a physician mutually acceptable to, and agreed to in good faith by, a majority of the Board and the Executive.
(ee) Type II Disability means the Executives substantial incapacity to perform the essential duties of her position for any three (3) months (whether or not consecutive)
during any twelve (12) month period due to the Executives physical or mental illness, as determined by a physician mutually acceptable to, and agreed to in good faith by, a majority of the Board and the Executive.
ARTICLE II.
EMPLOYMENT
2.1 Employment of Executive. The Company hereby agrees to employ the Executive, and the Executive agrees to enter into the employ of the Company, on the terms and subject to the conditions herein provided.
2.2 Term. The term of employment under this Agreement (the Initial Term) shall be for the period beginning on the Effective Date and ending on the fifth (5th) anniversary thereof, unless earlier terminated as provided in Section 4.1. On the fifth (5th) anniversary of the Effective Date and on each subsequent anniversary of the Effective Date, the employment term hereunder shall automatically be extended for successive one (1)-year periods (such periods, together with the Initial Term, the Term), unless either the Executive or the Company elects not to so extend the Term by notifying the other party in writing of such election no later than ninety (90) days prior to the last day of the then-current Term.
2.3 Position and Duties. During the Term, the Executive shall serve as the Companys Chief Merchandising Officer with such customary responsibilities, duties and authority as may from time to time be assigned to the Executive by the Board. Such duties, responsibilities and authority may include services for one or more subsidiaries or Affiliates of the Company. The Executive shall report directly to the Chief Executive Officer of the Company. The Executive shall devote substantially all her working time and efforts to the business and affairs of the Company. The Executive agrees to observe and comply with the Companys rules and policies, as the same may be adopted and amended from time to time.
ARTICLE III.
COMPENSATION AND RELATED MATTERS
3.1 Annual Base Salary. During the Term, the Executive shall receive a base salary at an initial rate of $550,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review annually for possible increase, but not decrease, in the Boards discretion (the Annual Base Salary).
3.2 Annual Bonus. With respect to each Fiscal Year that ends during the Term, commencing with Fiscal Year 2012, the Executive shall be eligible to receive an annual cash bonus (the Annual Bonus) based upon Company annual EBITDA and/or other financial and non-financial performance targets (the Performance Targets), established by the Board. The amount of the Annual Bonus shall be based upon the Companys attainment of the Performance Targets, as determined by the Board (or any authorized committee of the Board). Notwithstanding anything herein to the contrary, with respect to each subsequent Fiscal Year that ends during the Term, commencing with Fiscal Year 2012, the sum of the Annual Base Salary and the target Annual Bonus (the Target Total Compensation) for any such Fiscal Year shall be no less than the Target Total Compensation for the immediately preceding Fiscal Year. See
Exhibit A for actual historical Annual Base Salary, target Annual Bonus and Target Total Compensation. Each such Annual Bonus shall be payable within thirty (30) days following the completion of the audited financials for the Fiscal Year to which such Annual Bonus relates, but in any event within the period required by Section 409A, such that it qualifies as a short-term deferral pursuant to Section 1.409A-l(b)(4) of the Department of Treasury Regulations. Notwithstanding the foregoing, except as set forth in Article V, no bonus shall be payable with respect to any Fiscal Year unless the Executive remains continuously employed with the Company during the period beginning on the Effective Date and ending on the last day of such Fiscal Year. To the extent that the Company becomes subject to Section 162(m) of the Code (and all applicable post-initial public offering transition periods have expired with respect to applicable Company plans), the Annual Bonus for any applicable fiscal year will be payable pursuant to a qualified performance-based compensation bonus plan that has been approved by the stockholders of the Company in accordance with the provisions for such approval under Section 162(m) of the Code and the regulations promulgated thereunder, and on the basis of the Executives or the Companys attainment of objective financial or other operating criteria established by the Compensation Committee in its sole good faith discretion and in accordance with Section 162(m) of the Code and the regulations promulgated thereunder.
3.3 Benefits. During the Term, the Executive shall be entitled to the following benefits: (a) participation in the Companys employee health and welfare benefit plans and programs and arrangements which are applicable to the Companys senior executives as may be adopted by the Company from time to time, subject to the terms and conditions of the applicable employee benefit plan, program or arrangement, and (b) indemnification and/or directors and officers liability insurance coverage insuring the Executive against insurable events which occur while the Executive is a director or executive officer of the Company, on terms and conditions that are comparable to those then provided to other current or former directors or executive officers of the Company.
3.4 Vacation and Holidays. During the Term, the Executive shall be entitled to paid vacation and holidays in accordance with the Companys policies applicable to senior executives of the Company, provided that the Executive shall be entitled to paid vacation of no less than four (4) weeks for each full Fiscal Year during the Term. Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive.
3.5 Expenses. During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by her in the performance of her duties to the Company in accordance with the Companys expense reimbursement policy.
ARTICLE IV.
TERMINATION
4.1 Circumstances. During the Term, the Executives employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:
(a) Death. The Executives employment hereunder shall terminate upon her death.
(b) Type I Disability. If the Executive has incurred a Type I Disability, the Company may terminate the Executives employment due thereto.
(c) Termination for Cause. The Company may terminate the Executives employment for Cause.
(d) Termination without Cause. The Company may terminate the Executives employment without Cause.
(e) Resignation for Good Reason. The Executive may resign from her employment for Good Reason.
(f) Resignation without Good Reason. The Executive may resign from her employment without Good Reason.
(g) Resignation due to Type II Disability. The Executive may resign from her employment due to Type II Disability.
4.2 Notice of Termination. Any termination of the Executives employment by the Company or by the Executive pursuant to Section 4.1 (other than termination due to death pursuant to Section 4.1(a)) shall be communicated by a written notice to the other party hereto. Such written notice (a Notice of Termination) shall: (a) indicate the specific termination provision in this Agreement relied upon; and (b) specify a Date of Termination which, (i) if submitted by the Executive, shall be at least sixty (60) days, but no more than six (6) months, following the date of such notice and (ii) if submitted by the Company in connection with a termination of employment by the Company without Cause, shall be at least thirty (30) days following the date of such notice. Notwithstanding the foregoing, the Company may, in its sole discretion, change the Executives proposed Date of Termination to any date following the Companys receipt of the Executives Notice of Termination (even if such date is prior to the date specified in such Notice of Termination). A Notice of Termination submitted by the Company in connection with a termination of employment by the Company for Cause may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter chosen by the Company in its sole discretion; provided that, notwithstanding the foregoing, any Notice of Termination submitted by the Company in connection with a termination of the Executives employment for Cause within the meaning of Section 1.2(e)(i) (due to the Executives material breach of any material provision of this Agreement) or Section 1.2(e)(iv) (due to the Executives gross neglect in connection with the performance of any material portion of the Executives duties) shall indicate a Date of Termination that is at least thirty (30) days following the date of such notice, provided that such breach is capable of cure. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause, Good Reason, Type I Disability or Type II Disability shall not waive any right of the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Companys or the Executives rights hereunder; provided that a Notice of Termination submitted by the Executive of her intent to resign for Good Reason may not be given later than 90 days after the initial occurrence of the event constituting Good Reason.
4.3 Company Obligations upon Termination. Upon termination of the Executives employment, the Executive (or the Executives estate) shall be entitled to receive: (a) any amount of the Annual Base Salary through the Date of Termination not theretofore paid; (b) any reimbursement of expenses owing to the Executive under Section 3.5; (c) any accrued vacation pay owed to the Executive pursuant to Section 3.4; and (d) any amount arising from the Executives participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3.3, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements (including, if applicable, any death benefits). Except as otherwise set forth in Sections 5.1 through 5.3 below, the payments and benefits described in this Section 4.3 shall be the only payments and benefits payable in the event of the Executives termination of employment for any reason (other than, for the avoidance of doubt, any payments or benefits to which the Executive is entitled by virtue of her being a stockholder of the Company). The amounts in subsections (a)-(c) above shall be paid within sixty (60) days after the Executives termination, but in any event within the period required by Section 409A, such that it qualifies as a short-term deferral pursuant to Section 1.409A-1(b)(4) of the Department of Treasury Regulations.
ARTICLE V.
SEVERANCE PAYMENTS
5.1 Termination due to Death. If the Executives employment is terminated pursuant to Section 4.1(a) due to the Executives death, then, notwithstanding the last sentence of Section 3.2, in addition to the amounts set forth in Section 4.3, (a) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (b) the Company shall pay to the Executive (or the Executives estate) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs).
5.2 Termination without Cause; Resignation for Good Reason or without Good Reason; Due to Type I Disability.
(a) If (i) the Executives employment is terminated by the Company without Cause pursuant to Section 4.1(d) or due to Type I Disability pursuant to Section 4.1(b), or (ii) the Executive resigns from her employment for Good Reason pursuant to Section 4.1(e) (other than due to the occurrence of an event described in Section 1.2(m)(vii)), then in addition to the amounts set forth in Section 4.3, (A) the Company shall pay the Executive an amount equal to the sum of (x) two (2) times the Annual Base Salary as in effect immediately prior to the Date of Termination, payable in equal installments, in accordance with the Companys payroll practices,
during the two (2)-year period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, and (y) two (2) times the greater of (I) the Annual Bonus earned by the Executive for the Fiscal Year immediately prior to Fiscal Year in which the Date of Termination occurs, and (II) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs), (B) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (C) during the two (2)-year period beginning on the Date of Termination (such period, the Continuation Period), the Executive and her eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which she and her eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plans, the Company shall provide to the Executive and her eligible dependents, if applicable, substantially similar benefits during the Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-Up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Companys group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-l(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(l)(iv) of the Department of Treasury Regulations.
(b) Notwithstanding the foregoing, if (i) the Executive resigns from her employment for Good Reason due to the occurrence of an event described in Section 1.2(m)(vii) or (ii) on or after the fourth (4th) anniversary of the Effective Date, the Executive resigns from her employment without Good Reason, then in addition to the amounts set forth in Section 4.3, (A) the Company shall pay the Executive an amount equal to the sum of (x) the Annual Base Salary as in effect immediately prior to the Date of Termination, payable in equal installments, in accordance with the Companys payroll practices, during the one (1)-year period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, (y)
the amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets, payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January I, or later than December 31 of the calendar year immediately following the calendar year in which the Date of Termination occurs) and (z) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs), (B) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (C) during the one (1) year period beginning on the Date of Termination (such period, the Retirement Continuation Period), the Executive and her eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which she and her eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plan, the Company shall provide to the Executive and her eligible dependents, if applicable, substantially similar benefits during the Retirement Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-Up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Companys group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-l(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations.
5.3 Termination due to Type II Disability. If the Executive resigns from her employment due to Type II Disability pursuant to Section 4.1(g), then in addition to the amounts set forth in Section 4.3, (a) the Company shall pay the Executive an amount equal to the sum of (i) one and one-half (1.5) times the Annual Base Salary as in effect immediately prior to the Date
of Termination, payable in equal installments, in accordance with the Companys payroll practices, during the eighteen (18)-month period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, and (ii) one and one-half (1.5) times the greater of (A) the Annual Bonus earned by the Executive for the Fiscal Year immediately prior to Fiscal Year in which the Date of Termination occurs, and (B) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which the Date of Termination occurs), (b) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (c) during the eighteen (18)-month period beginning on the Date of Termination (such period, the Disability Continuation Period), the Executive and her eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which she and her eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plans, the Company shall provide to the Executive and her eligible dependents, if applicable, substantially similar benefits during the Disability Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Companys group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-1(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations.
5.4 Section 409A. Notwithstanding any provision to the contrary in this Agreement, no cash payments or other benefits described in Section 5.2 or 5.3 will be paid or made available to the Executive unless the Executives termination of employment constitutes a separation from service within the meaning of Section 1.409A-l(h) of the Department of Treasury Regulations, and unless, on or prior to the thirtieth (30th) day following the Date of Termination, (a) the Executive shall have executed a waiver and release of claims in the form attached as Exhibit B hereto, and (b) such release shall not have been revoked by the Executive
prior to such thirtieth (30th) day. Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed at the time of her separation from service to be a specified employee for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion of the Executives termination benefits shall not be provided to the Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executives separation from service with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A of the Code) or (ii) the date of the Executives death. Upon the expiration of the applicable deferral period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to Section 5.2 or 5.3 shall be paid in a lump sum to the Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided herein. For the avoidance of doubt, no payments or benefits shall be payable under Section 5.2 or 5.3 in the event of the Executives termination of employment due to expiration of the Term under Section 2.2.
5.5 Survival. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.
ARTICLE VI.
NON-COMPETITION; NON-SOLICITATION
6.1 Non-Competition Obligation. The Executive shall not, at any time during the period commencing on the Effective Date and ending on the second (2nd) anniversary of the Date of Termination (the Restricted Period), directly or indirectly, enter the employ of, or render any services to, any Person engaged in any business in North America or anywhere in the world in which the Company conducts business as of the Date of Termination (a) which derives more than fifteen percent (15%) of its consolidated revenues from the marketing or distribution of products sold by the Company, (b) which participates in the manufacturing or design of modular or component shelving or drawer systems or other material products of Elfa Group AB and its subsidiaries, or (c) which, as of the Date of Termination, the Board (including any committee thereof) or senior management of the Company has taken active steps to engage in or acquire (any such business, a Competitive Business); and the Executive shall not become interested in any such Competitive Business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity; provided, however, that nothing contained in this Section 6.1 shall be deemed to prohibit the Executive from working for another retail organization, provided that the Executive is not engaged in any aspect of the business of such retail organization (including, but not limited to, starting any division or other segment of such retail organization in a Competitive Business), whether in a supervisory, consultative or other capacity, relating to a Competitive Business. For the avoidance of doubt, the Executives position as a senior executive officer of a retail organization, of which a Competitive Business is an immaterial aspect of its general retail business, shall not be prohibited by, or constitute a violation of, the terms of this Section 6.1; provided that the Executive does not participate in any day-to-day operations or in any strategic or other decisions relating to the conduct of such retail organization as it relates to a Competitive Business and, to the extent necessary, has delegated such responsibilities to other management
personnel of such retail organization. It is expressly agreed that nothing contained in this Section 6.1 shall be deemed to prohibit the Executive from acquiring, solely as an investment, up to five percent (5%) of the outstanding shares of capital stock of any public corporation or working for a retail organization, provided that the Executive is not, directly or indirectly, engaged in a business relating to a Competitive Business.
6.2 Non-Solicitation Obligation. The Executive shall not, at any time during the Restricted Period, for her benefit or for the benefit of any other Person, solicit the employment or services of, or hire (or cause any Person to so solicit or hire), any person who upon the termination of the Executives employment hereunder, or within twelve (12) months prior thereto, was (a) employed by the Company or (b) a consultant to the Company. The restrictions in this Section 6.2 shall not apply to (i) general solicitations that are not specifically directed to employees of or consultants to the Company, (ii) at the request of a former employee, serving as an employment reference for such former employee, (iii) solicitations or hirings of former employees of the Company whose employment was terminated by the Company without Cause or who terminated their employment for Good Reason (as such terms are defined in the applicable employment agreement or, in the absence of such an agreement, as determined by a majority of the Board in its good faith discretion), or (iv) except as would constitute a breach of the covenants in Section 6.1, the solicitation or hiring of either Kip Tindell or Melissa Reiff following such executives termination of employment by the Company without Cause or by such executive for Good Reason (as such terms are defined in the applicable employment agreement).
6.3 Definition. As used in this Article VI, the term Company shall include the Company (as defined in the preamble hereof) and any of its direct or indirect subsidiaries.
6.4 Amendment. The provisions contained in Sections 6.1 and 6.2 may be altered and/or waived only with the prior written consent of a majority of the Board or the Compensation Committee.
ARTICLE VII.
NONDISCLOSURE OF PROPRIETARY INFORMATION
7.1 Nondisclosure. Except as required in the faithful performance of the Executives duties hereunder or pursuant to Section 7.3, the Executive shall, during the Term and after the Date of Termination, maintain in confidence and shall not directly or indirectly, use, disseminate, disclose or publish, or use for her benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Companys operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment (Proprietary Information), or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. The Executives obligation to maintain and not use, disseminate, disclose or publish, or use for her benefit or the benefit of any Person any Proprietary Information after the Date of Termination shall continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known
and in the public domain (other than by means of the Executives direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee of the Company). Notwithstanding anything herein to the contrary, during the Term and following the Date of Termination, each of the Executive and the Company shall retain the right to use the seven Foundation Principles described in the Companys news release, dated as of January 10, 2005, (with Communication Is Leadership having been added in 2008) without payment of royalties or other consideration, and nothing in this Agreement shall have any effect on the ownership of such Foundation Principles as of the Effective Date.
7.2 Return of Proprietary Information. Upon termination of the Executives employment with the Company for any reason, the Executive shall promptly deliver to the Company all Proprietary Information in the Executives possession, including without limitation all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Companys customers, business plans, marketing strategies, products or processes.
7.3 Response to Legal Process; Contents of Book. Notwithstanding Section 7.1, (a) the Executive may respond to a lawful and valid subpoena or other legal process relating to the Company or its business or operations; provided that the Executive shall: (i) give the Company the earliest possible notice thereof; (ii) as far in advance of the return date as possible, at the Companys sole cost and expense, make available to the Company and its counsel the documents and other information sought; and (iii) at the Companys sole cost and expense, assist such counsel in resisting or otherwise responding to such process, and (b) the disclosure of information, including Proprietary Information, in the Book (as defined in the Indemnification and Hold Harmless Agreement by and between Parent and Kip Tindell, dated as of June 13, 2012) currently being authored by Kip Tindell shall not violate or constitute a breach of this Agreement.
7.4 Non-Disparagement.
(a) The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, members or Affiliates, either orally or in writing, at any time; provided that the Executive may confer in confidence with her legal representatives and make truthful statements as required by law.
(b) The Company agrees to instruct the members of the Board and the executive officers of the Company not to disparage the Executive, either orally or in writing, at any time; provided that the Company may confer in confidence with its legal representatives and make truthful statements as required by law.
7.5 As used in this Article VII, the term Company shall include the Company (as defined in the preamble hereof), its parent, related entities, and any of its direct or indirect subsidiaries.
ARTICLE VIII.
REMEDIES
8.1 Acknowledgement; Blue Pencil. The Executive acknowledges and agrees that the benefits and payments provided under this Agreement represent adequate consideration for the Executives agreement to be bound by the restrictive covenants set forth in Articles VI and VII, that the Executives agreement to be bound by such restrictive covenants is a material inducement to the Companys entering into this Agreement. In the event, however, that any restrictive covenant set forth in Articles VI or VII shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it is the intention of the Executive and Company that it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.
8.2 Injunctive Relief. The Executive acknowledges and agrees that a breach of the covenants contained in Articles VI or VII will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Articles VI or VII, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief with any requirement to post a bond. The Company acknowledges and agrees that a breach of the covenants contained in Section 7.4(b) will cause irreparable damage to the Executive, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Company agrees that in the event of a breach of any of the covenants contained in Section 7.4(b), in addition to any other remedy which may be available at law or in equity, the Executive will be entitled to specific performance and injunctive relief without any requirement to post a bond.
ARTICLE IX.
MISCELLANEOUS
9.1 Assignment. The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates. The Executive may not assign her rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.
9.2 Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without reference to the principles of conflicts of law of New York or any other jurisdiction, and where applicable, the laws of the United States.
9.3 Notices. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows:
(a) If to the Company:
TCS Holdings, Inc.
500 Freeport Parkway
Coppell, TX 75019
ATTN: Melissa Reiff, President
with a copy to:
Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
ATTN: Timothy Flynn
and a copy to:
Latham & Watkins LLP
885 Third Avenue
Suite 1000
New York, NY 10022
ATTN: Howard Sobel; Bradd Williamson
(b) If to the Executive, to the address set forth in the Companys records or at any other address as any party shall have specified by notice in writing to the other party.
9.4 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
9.5 Entire Agreement. The terms of this Agreement, the other agreements and instruments contemplated hereby or referred to herein, the Stockholders Agreement dated as of August 16, 2007, by and among Parent and the stockholders of Parent, and the Contribution and Subscription Agreement dated as of August 16, 2007, by and among Parent and certain stockholders of The Container Store, Inc., each as may be amended from time to time (collectively, the Related Agreements), are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of (and supersede) any prior or contemporaneous agreement (including without limitation the Prior Agreement and any term sheet or similar agreement entered into between the Company and the Executive). The parties further intend that this Agreement and the Related Agreements shall constitute the complete and exclusive statement of
their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement and the Related Agreements.
9.6 Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company and approved by a majority of the Board, which expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and approved by a majority of the Board, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or conform. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.
9.7 No Inconsistent Action. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.
9.8 Construction. This Agreement shall be deemed drafted equally by both the parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary: (a) the plural includes the singular and the singular includes the plural; (b) and and or are each used both conjunctively and disjunctively; (c) any, all, each, or every means any and all, and each and every; (d) includes and including are each without limitation; (e) herein, hereof, hereunder and other similar compounds of the word here refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.
9.9 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before an arbitrator in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction. Notwithstanding the foregoing, (a) the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Articles VI or VII of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without requiring the Company to post a bond, and (b) the Executive shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of
Section 7.4(b) of this Agreement and the Company hereby consents that such restraining order or injunction may be granted without requiring the Executive to post a bond. Only individuals who are: (i) lawyers engaged full-time in the practice of law and (ii) on the AAA register of arbitrators shall be selected as an arbitrator. Within twenty (20) days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law. It is mutually agreed that the written decision of the arbitrator shall be valid, binding, final and non-appealable, provided, however, that the parties hereto agree that the arbitrator shall not be empowered to award punitive damages against any party to such arbitration. The arbitrator shall require the non-prevailing party to pay the arbitrators full fees and expenses or, if in the arbitrators opinion there is no prevailing party, the arbitrators fees and expenses shall be borne equally by the parties thereto. In the event action is brought to enforce the provisions of this Agreement pursuant to this Section 9.9, the non-prevailing parties shall be required to pay the reasonable attorneys fees and expenses of the prevailing parties, except that if in the opinion of the court or arbitrator deciding such action there is no prevailing party, each party shall pay its own attorneys fees and expenses.
9.10 Enforcement. In the event any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect: (a) such provision shall be fully severable; (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a portion of this Agreement; and (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by such invalid, illegal or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such invalid, illegal or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in substance to such invalid, illegal or unenforceable provision as may be possible and be valid, legal and enforceable.
9.11 Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.
9.12 Employee Acknowledgment. The Executive acknowledges that she has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on her own judgment.
9.13 Section 409A.
(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that a majority of the Board determines that any amounts payable pursuant to this Agreement may be subject to Section 409A, the Company may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to: (i) exempt such payments from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to such payments or (ii) comply with the requirements of Section 409A and thereby avoid the application of penalty taxes under
Section 409A; provided that no such amendments, policies, procedures or actions shall reduce the economic value to the Executive of this Agreement from the value of this Agreement (without taking into account the effect of Section 409A) prior to the adoption or taking of such amendments, policies, procedures or actions. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or any of its Affiliates, employees or agents.
(b) To the extent that any installment payments under this Agreement are deemed to constitute nonqualified deferred compensation within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), each such payment that the Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.
(c) To the extent that any reimbursements or corresponding in-kind benefits provided to the Executive under this Agreement (including, without limitation, the Health Payment and the Health Gross-Up Payment) are deemed to constitute deferred compensation within the meaning of Section 409A to the Executive, such amounts shall be paid or reimbursed reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred, and in any event in accordance with Section 1.409A-3(i)(l)(iv) of the Department of Treasury Regulations. The amount of any such payments or expense reimbursements in one calendar year shall not affect the expenses or in-kind benefits eligible for payment or reimbursement in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and the Executives right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.
9.14 Cooperation. During the Term hereof and thereafter, the Executive shall cooperate with the Company in any disputes with third parties, internal investigations or administrative, regulatory or judicial proceedings as reasonably requested by the Company and at the Companys sole cost and expense (including, without limitation, the Executive being available to the Company upon reasonable notice for interviews and factual investigations, at times and on schedules that are reasonably consistent with the Executives other permitted activities and commitments).
9.15 Indemnification. To the maximum extent allowed under applicable law and the Companys By-Laws and other corporate organizational documents, in the event that the Executive is a party to any threatened, pending or completed action, suit or proceeding (other than any action, suit or proceeding arising under or related to this Agreement or any other compensation agreement), whether civil, criminal, administrative or investigative, by reason of the fact that she is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, the Company shall indemnify the Executive and hold her harmless against all expenses (including reasonable and documented attorneys fees and costs incurred by the Executive), judgments, fines and amounts paid in settlement (subject to the Companys consent, with such consent not to be unreasonably
withheld) actually and reasonably incurred by her, as and when incurred, in connection with such action, suit or proceeding; provided that the Executive acted in good faith and in a manner she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Executive did not act in good faith and in a manner which she reasonably believed to be in or not opposed to the best interests of the Company, or that, with respect to any criminal action or proceeding, the Executive had reasonable cause to believe that her conduct was unlawful. The provisions of this Section 9.15 shall not be deemed exclusive of any other rights of indemnification to which the Executive may be entitled or which may be granted to her, and it shall be in addition to any rights of indemnification to which she may be entitled under any policy of insurance. These provisions shall continue in effect after Executive has ceased to be an officer or director of the Company.
9.16 No Mitigation. The Executive shall have no obligation to mitigate any payments due hereunder.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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TCS HOLDINGS, INC. | |
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By: |
/s/ Tim Flynn |
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Name: Tim Flynn |
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Title: President |
[TCS Amended and Restated Employment Agreement with Sharon Tindell]
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EXECUTIVE | |
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By: |
/s/ Sharon Tindell |
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Sharon Tindell |
[TCS Amended and Restated Employment Agreement with Sharon Tindell]
EXHIBIT A
Historical Base Compensation, Target Bonus Compensation and Target Total Compensation
Fiscal Year |
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Base Compensation |
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Target Annual |
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Target Total |
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2011 |
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$ |
525,000 |
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$ |
650,000 |
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$ |
1,175,000 |
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2012 |
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$ |
550,000 |
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$ |
715,000 |
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$ |
1,265,000 |
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EXHIBIT B
Form of Release Agreement
Sharon Tindell (the Executive) agrees for the Executive, the Executives spouse and child or children (if any), the Executives heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, hereby forever to release, discharge, and covenant not to sue TCS Holdings, Inc., a Delaware corporation (the Company), the Companys past, present, or future parent, affiliated, related, and/or subsidiary entities, and all of their past and present directors, shareholders, officers, general or limited partners, employees, agents, and attorneys, and agents and representatives of such entities, and employee benefit plans in which the Executive is or has been a participant by virtue of her employment with the Company, from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected, which the Executive has or may have had against such entities based on any events or circumstances ansmg or occurring on or prior to (or, with respect to claims of disparagement, arising or occurring on or prior to the date this release (the Release) is executed), arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever, (a) Executives employment with the Company or the termination thereof or (b) Executives status at any time as a holder of any securities ofthe Company, and any and all claims based on, relating to, or arising under federal, state, or local laws, including without limitation claims of discrimination, harassment, retaliation, wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, liability in tort, or for violation of public policy, claims of any kind that may be brought in any court or administrative agency, any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Texas Commission on Human Rights Act, the Texas Anti-Retaliation Act, the Texas Labor Code, the Sarbanes-Oxley Act, and similar state or local statutes, ordinances, and regulations; provided, however, notwithstanding anything to the contrary set forth herein, that this general release shall not extend to (i) benefit claims under employee pension benefit plans in which the Executive is a participant by virtue of her employment with the Company or to benefit claims under employee welfare benefit plans for occurrences (e.g., medical care, death, or onset of disability) arising after the execution of this Release by the Executive, and (ii) any obligation under this Release, or under that certain Amended and Restated Employment Agreement entered into on October , 2012 by and between the Company and the Executive, assumed by any party thereto.
The Executive understands that this Release includes a release of claims arising under the Age Discrimination in Employment Act (ADEA). The Executive understands and warrants that she has been given a period of twenty-one (21) days to review and consider this Release and such period shall not be affected or extended by any changes, whether material or immaterial, that might be made to this Release. The Executive is hereby advised to consult with
an attorney prior to executing the Release. By her signature below, the Executive warrants that she has had the opportunity to do so and to be fully and fairly advised by that legal counsel as to the terms of this Release. The Executive further warrants that she understands that she may use as much or all of her twenty-one (21)-day period as she wishes before signing, and warrants that she has done so.
The Executive further warrants that she understands that she has seven (7) days after signing this Release to revoke the Release by notice in writing to . This Release shall be binding, effective, and enforceable upon both parties upon the expiration of this seven (7)-day revocation period without having received such revocation, but not before such time.
* * * * *
The Executive acknowledges and agrees that this Release is a legally binding document and the Executives signature will commit the Executive to its terms. Executive acknowledges and agrees that the Executive has carefully read and fully understands all of the provisions of this Release and that voluntarily enters into this Release by signing below. Upon execution, the Executive agree to deliver a signed copy of this Release to .
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Sharon Tindell | |
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Date: |
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Exhibit 10.6
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the Agreement) is entered into on October 31, 2012, and effective as of August 15, 2012 (the Effective Date), by and between Melissa Reiff (the Executive) and TCS Holdings, Inc., a Delaware corporation (Parent), and any of its subsidiaries and affiliates as may employ the Executive from time to time (collectively, and together with any successor thereto, the Company).
RECITALS
WHEREAS, the Company and the Executive are currently parties to that certain Employment Agreement, dated as of August 16, 2007, as amended (the Prior Agreement);
WHEREAS, the Company desires to assure itself of the continued services of the Executive by engaging the Executive to perform services on the terms and subject to the conditions set out in this Agreement;
WHEREAS, the Executive desires to provide services to the Company on the terms and subject to the conditions set out in this Agreement; and
WHEREAS, the Company and the Executive desire to enter into this Agreement and this Agreement shall supersede the Prior Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I.
DEFINED TERMS
1.1 Previously Defined Terms. As used herein, each term defined in the first paragraph and recitals of this Agreement shall have the meaning set forth above.
1.2 Definitions. As used herein, the following terms shall have the following respective meanings:
(a) Affiliate means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person. As used in the preceding sentence, control has the meaning given such term under Rule 405 of the Securities Act of 1933, as amended.
(b) Annual Base Salary has the meaning set forth in Section 3.1.
(c) Annual Bonus has the meaning set forth in Section 3.2.
(d) Board means the Board of Directors of the Parent.
(e) The Company shall have Cause to terminate the Executives employment hereunder upon the occurrence of any one or more of the following events: (i) a material breach by the Executive of any material provision of this Agreement which is not corrected by the Executive within thirty (30) days after receipt of written notice from the Company specifying such breach, to the extent such breach is capable of cure; (ii) the Executives conviction of, or entry by the Executive of a guilty or nolo contendere plea to, the commission of a felony or a crime involving moral turpitude, other than vicarious liability or traffic violations; (iii) the Executives intentional breach of Company policies constituting theft or embezzlement from the Company or any of its customers or suppliers; or (iv) the Executives gross neglect or intentional misconduct in connection with the performance of any material portion of the Executives duties (which, in the case of the Executives gross neglect, is not corrected by the Executive within thirty (30) days after receipt of written notice from the Company specifying such neglect, to the extent that such neglect is capable of cure).
(f) Change in Control means the occurrence of any of the following events: (i) a change in ownership or control of Parent effected through a transaction or series of transactions (other than an offering of equity securities of Parent or any of its subsidiaries to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any person or related group of persons (as such terms are used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended) (other than Parent, any of its subsidiaries, any employee benefit plan maintained by Parent or any of its subsidiaries, any Principal Stockholder or any person that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, Parent or a Principal Stockholder) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of securities of Parent possessing more than fifty percent (50%) of the total combined voting power of Parents securities outstanding immediately after such acquisition; (ii) individuals who, as of the Effective Date, constitute the Board (the Incumbent Board) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election by Parents stockholders, or nomination for election by the Board, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board; or (iii) the consummation by Parent (whether directly involving Parent or indirectly involving Parent through one or more intermediaries) of a sale or other disposition of all or substantially all of Parents assets, other than a transaction which results in Parents voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Parent or the person that, as a result of the transaction, controls, directly or indirectly, Parent or owns, directly or indirectly, all or substantially all of Parents assets or otherwise succeeds to the business of Parent (Parent or such person, the Successor Entity)) directly or indirectly, at least a majority of the combined voting power of the Successor Entitys outstanding voting securities immediately after the transaction.
(g) Compensation Committee means the Compensation Committee of the Board.
(h) Competitive Business has the meaning set forth in Section 6.1.
(i) Continuation Period has the meaning set forth in Section 5.2(a).
(j) Date of Termination means: (i) if the Executives employment is terminated by her death, the date of her death; (ii) if the Executives employment is terminated pursuant to Sections 4.1(b)-(g), either the date indicated in the Notice of Termination or the date specified by the Company pursuant to Section 4.2, whichever is earlier; or (iii) if the Executives employment is terminated due to the expiration of the Term under Section 2.2, the date of expiration of the then-current Term.
(k) Disability Continuation Period has the meaning set forth in Section 5.3.
(l) Fiscal Year means the fiscal year of the Company, as in effect from time to time.
(m) The Executive shall have Good Reason to resign from her employment hereunder upon the occurrence of any one or more of the following events without her prior written consent: (i) an adverse change in the Executives title or reporting line or the Executives material duties, authorities or responsibilities; (ii) the assignment to the Executive of duties materially inconsistent with her position; (iii) a material breach by the Company of any material provision of this Agreement; (iv) a reduction of the Executives Annual Base Salary or benefits hereunder (other than any such reduction which is part of, and generally consistent with, a general reduction affecting other similarly situated executives of the Company) or Annual Bonus opportunity (it being understood that the Performance Targets shall be determined annually by the Board); (v) failure of the Company to pay any portion of the Annual Base Salary or Annual Bonus otherwise payable to the Executive or to provide the benefits set forth in Section 3.3 (other than as provided in clause (iv) above); (vi) the Companys requiring the Executive to be headquartered at any office or location more than fifty (50) miles from Coppell, Texas, except for required travel on the Companys business to an extent substantially consistent with the Executives present business travel obligations; or (vii) the termination of the employment of either Kip Tindell or Sharon Tindell by the Company without Cause or by such executive for Good Reason (each such term as defined in the applicable executives employment agreement); provided, however, that notwithstanding any of the foregoing the Executive may not resign from her employment for Good Reason unless: (A) the Executive provides the Company with at least sixty (60) days prior written Notice of Termination of her intent to resign for Good Reason and (B) the Company has not corrected the circumstances constituting Good Reason prior to the Date of Termination specified in the Notice of Termination; provided that such Notice of Termination may not be given later than ninety (90) days after the initial occurrence of the event constituting Good Reason; provided, further, that notwithstanding anything herein to the contrary, a termination of employment by the Executive for any reason pursuant to a Notice of Termination given during the thirty (30) day period immediately following the six (6)-month anniversary of the occurrence of a Change in Control shall be deemed to be termination of employment for Good Reason.
(n) Health Gross-Up Payment means an additional amount equal to the federal, state and local income and payroll taxes that the Executive incurs on each monthly Health Payment.
(o) Health Payment means the monthly premium amount paid by the Executive pursuant to Section 5.2(a), 5.2(b) or 5.3, as applicable.
(p) Incumbent Board has the meaning set forth in Section 1.2(f).
(q) Initial Term has the meaning set forth in Section 2.2.
(r) Notice of Termination has the meaning set forth in Section 4.2.
(s) Performance Target has the meaning set forth in Section 3.2.
(t) Person means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.
(u) Principal Stockholders means Green Equity Investors V, L.P., Green Equity Investors Side V, L.P., and any Affiliate thereof.
(v) Proprietary Information has the meaning set forth in Section 7.1.
(w) Related Agreements has the meaning set forth in Section 9.5.
(x) Restricted Period has the meaning set forth in Section 6.1.
(y) Retirement Continuation Period has the meaning set forth in Section 5.2(b).
(z) Section 409A means Section 409A of the United States Internal Revenue Code of 1986, as amended, and the Department of Treasury regulations and other interpretive guidance issued with respect thereto.
(aa) Successor Entity has the meaning set forth in Section 1.2(f).
(bb) Target Total Compensation has the meaning set forth in Section 3.2.
(cc) Term has the meaning set forth in Section 2.2.
(dd) Type I Disability means the Executives incapacity to perform the essential duties of her position for any six (6) months (whether or not consecutive) during any twelve (12) month period due to the Executives physical or mental illness, as determined by a physician mutually acceptable to, and agreed to in good faith by, a majority of the Board and the Executive.
(ee) Type II Disability means the Executives substantial incapacity to perform the essential duties of her position for any three (3) months (whether or not consecutive)
during any twelve (12) month period due to the Executives physical or mental illness, as determined by a physician mutually acceptable to, and agreed to in good faith by, a majority of the Board and the Executive.
ARTICLE II.
EMPLOYMENT
2.1 Employment of Executive. The Company hereby agrees to employ the Executive, and the Executive agrees to enter into the employ of the Company, on the terms and subject to the conditions herein provided.
2.2 Term. The term of employment under this Agreement (the Initial Term) shall be for the period beginning on the Effective Date and ending on the fifth (5th) anniversary thereof, unless earlier terminated as provided in Section 4.1. On the fifth (5th) anniversary of the Effective Date and on each subsequent anniversary of the Effective Date, the employment term hereunder shall automatically be extended for successive one (1)-year periods (such periods, together with the Initial Term, the Term), unless either the Executive or the Company elects not to so extend the Term by notifying the other party in writing of such election no later than ninety (90) days prior to the last day of the then-current Term.
2.3 Position and Duties. During the Term, the Executive shall serve as the Companys President with such customary responsibilities, duties and authority as may from time to time be assigned to the Executive by the Board. Such duties, responsibilities and authority may include services for one or more subsidiaries or Affiliates of the Company. The Executive shall report directly to the Chief Executive Officer of the Company. The Executive shall devote substantially all her working time and efforts to the business and affairs of the Company. The Executive agrees to observe and comply with the Companys rules and policies, as the same may be adopted and amended from time to time.
ARTICLE III.
COMPENSATION AND RELATED MATTERS
3.1 Annual Base Salary. During the Term, the Executive shall receive a base salary at an initial rate of $550,000 per annum, which shall be paid in accordance with the customary payroll practices of the Company, subject to review annually for possible increase, but not decrease, in the Boards discretion (the Annual Base Salary).
3.2 Annual Bonus. With respect to each Fiscal Year that ends during the Term, commencing with Fiscal Year 2012, the Executive shall be eligible to receive an annual cash bonus (the Annual Bonus) based upon Company annual EBITDA and/or other financial and non-financial performance targets (the Performance Targets), established by the Board. The amount of the Annual Bonus shall be based upon the Companys attainment of the Performance Targets, as determined by the Board (or any authorized committee of the Board). Notwithstanding anything herein to the contrary, with respect to each subsequent Fiscal Year that ends during the Term, commencing with Fiscal Year 2012, the sum of the Annual Base Salary and the target Annual Bonus (the Target Total Compensation) for any such Fiscal Year shall be no less than the Target Total Compensation for the immediately preceding Fiscal Year. See
Exhibit A for actual historical Annual Base Salary, target Annual Bonus and Target Total Compensation. Each such Annual Bonus shall be payable within thirty (30) days following the completion of the audited financials for the Fiscal Year to which such Annual Bonus relates, but in any event within the period required by Section 409A, such that it qualifies as a short-term deferral pursuant to Section 1.409A-l(b)(4) of the Department of Treasury Regulations. Notwithstanding the foregoing, except as set forth in Article V, no bonus shall be payable with respect to any Fiscal Year unless the Executive remains continuously employed with the Company during the period beginning on the Effective Date and ending on the last day of such Fiscal Year. To the extent that the Company becomes subject to Section 162(m) of the Code (and all applicable post-initial public offering transition periods have expired with respect to applicable Company plans), the Annual Bonus for any applicable fiscal year will be payable pursuant to a qualified performance-based compensation bonus plan that has been approved by the stockholders of the Company in accordance with the provisions for such approval under Section 162(m) of the Code and the regulations promulgated thereunder, and on the basis of the Executives or the Companys attainment of objective financial or other operating criteria established by the Compensation Committee in its sole good faith discretion and in accordance with Section 162(m) of the Code and the regulations promulgated thereunder.
3.3 Benefits. During the Term, the Executive shall be entitled to the following benefits: (a) participation in the Companys employee health and welfare benefit plans and programs and arrangements which are applicable to the Companys senior executives as may be adopted by the Company from time to time, subject to the terms and conditions of the applicable employee benefit plan, program or arrangement, and (b) indemnification and/or directors and officers liability insurance coverage insuring the Executive against insurable events which occur while the Executive is a director or executive officer of the Company, on terms and conditions that are comparable to those then provided to other current or former directors or executive officers of the Company.
3.4 Vacation and Holidays. During the Term, the Executive shall be entitled to paid vacation and holidays in accordance with the Companys policies applicable to senior executives of the Company, provided that the Executive shall be entitled to paid vacation of no less than four (4) weeks for each full Fiscal Year during the Term. Any vacation shall be taken at the reasonable and mutual convenience of the Company and the Executive.
3.5 Expenses. During the Term, the Company shall reimburse the Executive for all reasonable travel and other business expenses incurred by her in the performance of her duties to the Company in accordance with the Companys expense reimbursement policy.
ARTICLE IV.
TERMINATION
4.1 Circumstances. During the Term, the Executives employment hereunder may be terminated by the Company or the Executive, as applicable, without any breach of this Agreement only under the following circumstances:
(a) Death. The Executives employment hereunder shall terminate upon her death.
(b) Type I Disability. If the Executive has incurred a Type I Disability, the Company may terminate the Executives employment due thereto.
(c) Termination for Cause. The Company may terminate the Executives employment for Cause.
(d) Termination without Cause. The Company may terminate the Executives employment without Cause.
(e) Resignation for Good Reason. The Executive may resign from her employment for Good Reason.
(f) Resignation without Good Reason. The Executive may resign from her employment without Good Reason.
(g) Resignation due to Type II Disability. The Executive may resign from her employment due to Type II Disability.
4.2 Notice of Termination. Any termination of the Executives employment by the Company or by the Executive pursuant to Section 4.1 (other than termination due to death pursuant to Section 4.1(a)) shall be communicated by a written notice to the other party hereto. Such written notice (a Notice of Termination) shall: (a) indicate the specific termination provision in this Agreement relied upon; and (b) specify a Date of Termination which, (i) if submitted by the Executive, shall be at least sixty (60) days, but no more than six (6) months, following the date of such notice and (ii) if submitted by the Company in connection with a termination of employment by the Company without Cause, shall be at least thirty (30) days following the date of such notice. Notwithstanding the foregoing, the Company may, in its sole discretion, change the Executives proposed Date of Termination to any date following the Companys receipt of the Executives Notice of Termination (even if such date is prior to the date specified in such Notice of Termination). A Notice of Termination submitted by the Company in connection with a termination of employment by the Company for Cause may provide for a Date of Termination on the date the Executive receives the Notice of Termination, or any date thereafter chosen by the Company in its sole discretion; provided that, notwithstanding the foregoing, any Notice of Termination submitted by the Company in connection with a termination of the Executives employment for Cause within the meaning of Section 1.2(e)(i) (due to the Executives material breach of any material provision of this Agreement) or Section 1.2(e)(iv) (due to the Executives gross neglect in connection with the performance of any material portion of the Executives duties) shall indicate a Date of Termination that is at least thirty (30) days following the date of such notice, provided that such breach is capable of cure. The failure by the Company or the Executive to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Cause, Good Reason, Type I Disability or Type II Disability shall not waive any right of the Company or the Executive hereunder or preclude the Company or the Executive from asserting such fact or circumstance in enforcing the Companys or the Executives rights hereunder; provided that a Notice of Termination submitted by the Executive of her intent to resign for Good Reason may not be given later than 90 days after the initial occurrence of the event constituting Good Reason.
4.3 Company Obligations upon Termination. Upon termination of the Executives employment, the Executive (or the Executives estate) shall be entitled to receive: (a) any amount of the Annual Base Salary through the Date of Termination not theretofore paid; (b) any reimbursement of expenses owing to the Executive under Section 3.5; (c) any accrued vacation pay owed to the Executive pursuant to Section 3.4; and (d) any amount arising from the Executives participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 3.3, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements (including, if applicable, any death benefits). Except as otherwise set forth in Sections 5.1 through 5.3 below, the payments and benefits described in this Section 4.3 shall be the only payments and benefits payable in the event of the Executives termination of employment for any reason (other than, for the avoidance of doubt, any payments or benefits to which the Executive is entitled by virtue of her being a stockholder of the Company). The amounts in subsections (a)-(c) above shall be paid within sixty (60) days after the Executives termination, but in any event within the period required by Section 409A, such that it qualifies as a short-term deferral pursuant to Section 1.409A-l(b)(4) of the Department of Treasury Regulations.
ARTICLE V.
SEVERANCE PAYMENTS
5.1 Termination due to Death. If the Executives employment is terminated pursuant to Section 4.l(a) due to the Executives death, then, notwithstanding the last sentence of Section 3.2, in addition to the amounts set forth in Section 4.3, (a) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (b) the Company shall pay to the Executive (or the Executives estate) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs).
5.2 Termination without Cause; Resignation for Good Reason or without Good Reason; Due to Type I Disability.
(a) If (i) the Executives employment is terminated by the Company without Cause pursuant to Section 4.1(d) or due to Type I Disability pursuant to Section 4.1(b), or (ii) the Executive resigns from her employment for Good Reason pursuant to Section 4.1(e) (other than due to the occurrence of an event described in Section 1.2(m)(vii)), then in addition to the amounts set forth in Section 4.3, (A) the Company shall pay the Executive an amount equal to the sum of (x) two (2) times the Annual Base Salary as in effect immediately prior to the Date of Termination, payable in equal installments, in accordance with the Companys payroll practices,
during the two (2)-year period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, and (y) two (2) times the greater of (I) the Annual Bonus earned by the Executive for the Fiscal Year immediately prior to Fiscal Year in which the Date of Termination occurs, and (II) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs), (B) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (C) during the two (2)-year period beginning on the Date of Termination (such period, the Continuation Period), the Executive and her eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which she and her eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plans, the Company shall provide to the Executive and her eligible dependents, if applicable, substantially similar benefits during the Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-Up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Companys group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-l(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(l)(iv) of the Department of Treasury Regulations.
(b) Notwithstanding the foregoing, if (i) the Executive resigns from her employment for Good Reason due to the occurrence of an event described in Section 1.2(m)(vii) or (ii) on or after the fourth (4th) anniversary of the Effective Date, the Executive resigns from her employment without Good Reason, then in addition to the amounts set forth in Section 4.3, (A) the Company shall pay the Executive an amount equal to the sum of (x) the Annual Base Salary as in effect immediately prior to the Date of Termination, payable in equal installments, in accordance with the Companys payroll practices, during the one (I)-year period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, (y)
the amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets, payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which the Date of Termination occurs) and (z) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which Date of Termination occurs), (B) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (C) during the one (1) year period beginning on the Date of Termination (such period, the Retirement Continuation Period), the Executive and her eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which she and her eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plan, the Company shall provide to the Executive and her eligible dependents, if applicable, substantially similar benefits during the Retirement Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-Up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Companys group health plan under COBRA is intended to qualify for the exception from deferred compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-l(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(l)(iv) of the Department of Treasury Regulations.
5.3 Termination due to Type II Disability. If the Executive resigns from her employment due to Type II Disability pursuant to Section 4.1(g), then in addition to the amounts set forth in Section 4.3, (a) the Company shall pay the Executive an amount equal to the sum of (i) one and one-half (1.5) times the Annual Base Salary as in effect immediately prior to the Date
of Termination, payable in equal installments, in accordance with the Companys payroll practices, during the eighteen (18)-month period beginning on the first payroll date that follows the thirtieth (30th) day following the Date of Termination, and (ii) one and one-half (1.5) times the greater of (A) the Annual Bonus earned by the Executive for the Fiscal Year immediately prior to Fiscal Year in which the Date of Termination occurs, and (B) a prorated amount of the Annual Bonus for the Fiscal Year in which the Date of Termination occurs that the Executive would have received to the extent she remained employed through the end of the Fiscal Year in which the Date of Termination occurred based on the Companys actual attainment of the applicable Performance Targets (prorated based on the number days that the Executive is employed by the Company during the Fiscal Year in which the Date of Termination occurs), payable at the same time such Annual Bonus would have been paid had the Executive remained employed through the end of the Fiscal Year in which the Date of Termination occurs (but in no event earlier than January 1, or later than December 31 of the calendar year immediately following the calendar year in which the Date of Termination occurs), (b) all unvested stock options held by the Executive immediately prior to the Date of Termination shall, as of the Date of Termination, become vested and exercisable, subject to the terms and conditions of the applicable option plan and option agreement(s), and (c) during the eighteen (18)-month period beginning on the Date of Termination (such period, the Disability Continuation Period), the Executive and her eligible dependents, if applicable, shall be entitled to continued participation in the Companys medical, health, disability and similar welfare benefit plans in which she and her eligible dependents, if applicable, were participating on the Date of Termination at the Companys sole expense; provided that if such continued participation is not permitted under such plans, the Company shall provide to the Executive and her eligible dependents, if applicable, substantially similar benefits during the Disability Continuation Period; provided, further, that in order to receive such continued coverage, the Executive shall be required to pay to the Company at the same time that premium payments are due for the month an amount equal to the full monthly premium payments required for such coverage. The Company shall reimburse to the Executive monthly the Health Payment no later than the next payroll date of the Company that occurs after the date the premium for the month is paid by the Executive. In addition, on each date on which the monthly Health Payments are made, the Company shall pay to the Executive the Health Gross-up Payment. The COBRA health continuation period under Section 4980B of the Code shall run concurrently with the period of continued health coverage following the termination date. The Health Payment paid to the Executive during the period of time during which the Executive would be entitled to continuation coverage under the Companys group health plan under COBRA is intended to qualify for the exception from defined compensation as a medical benefit provided in accordance with the requirements of Section 1.409A-1(b)(9)(v)(B) of the Department of Treasury Regulations. The Health Payment and the Health Gross-up Payment shall be reimbursed to the Executive in a manner that complies with the requirements of Section 1.409A-3(i)(l)(iv) of the Department of Treasury Regulations.
5.4 Section 409A. Notwithstanding any provision to the contrary in this Agreement, no cash payments or other benefits described in Section 5.2 or 5.3 will be paid or made available to the Executive unless the Executives termination of employment constitutes a separation from service within the meaning of Section 1.409A-1(h) of the Department of Treasury Regulations, and unless, on or prior to the thirtieth (30th) day following the Date of Termination, (a) the Executive shall have executed a waiver and release of claims in the form attached as Exhibit B hereto, and (b) such release shall not have been revoked by the Executive
prior to such thirtieth (30th) day. Notwithstanding any provision to the contrary in this Agreement, if the Executive is deemed at the time of her separation from service to be a specified employee for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the termination benefits to which the Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such portion of the Executives termination benefits shall not be provided to the Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from the date of the Executives separation from service with the Company (as such term is defined in the Department of Treasury Regulations issued under Section 409A of the Code) or (ii) the date of the Executives death. Upon the expiration of the applicable deferral period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to Section 5.2 or 5.3 shall be paid in a lump sum to the Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided herein. For the avoidance of doubt, no payments or benefits shall be payable under Section 5.2 or 5.3 in the event of the Executives termination of employment due to expiration of the Term under Section 2.2.
5.5 Survival. The expiration or termination of the Term shall not impair the rights or obligations of any party hereto, which shall have accrued prior to such expiration or termination.
ARTICLE VI.
NON-COMPETITION; NON-SOLICITATION
6.1 Non-Competition Obligation. The Executive shall not, at any time during the period commencing on the Effective Date and ending on the second (2nd) anniversary of the Date of Termination (the Restricted Period), directly or indirectly, enter the employ of, or render any services to, any Person engaged in any business in North America or anywhere in the world in which the Company conducts business as of the Date of Termination (a) which derives more than fifteen percent (15%) of its consolidated revenues from the marketing or distribution of products sold by the Company, (b) which participates in the manufacturing or design of modular or component shelving or drawer systems or other material products of Elfa Group AB and its subsidiaries, or (c) which, as of the Date of Termination, the Board (including any committee thereof) or senior management of the Company has taken active steps to engage in or acquire (any such business, a Competitive Business); and the Executive shall not become interested in any such Competitive Business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity; provided, however, that nothing contained in this Section 6.1 shall be deemed to prohibit the Executive from working for another retail organization, provided that the Executive is not engaged in any aspect of the business of such retail organization (including, but not limited to, starting any division or other segment of such retail organization in a Competitive Business), whether in a supervisory, consultative or other capacity, relating to a Competitive Business. For the avoidance of doubt, the Executives position as a senior executive officer of a retail organization, of which a Competitive Business is an immaterial aspect of its general retail business, shall not be prohibited by, or constitute a violation of, the terms of this Section 6.1; provided that the Executive does not participate in any day-to-day operations or in any strategic or other decisions relating to the conduct of such retail organization as it relates to a Competitive Business and, to the extent necessary, has delegated such responsibilities to other management
personnel of such retail organization. It is expressly agreed that nothing contained in this Section 6.1 shall be deemed to prohibit the Executive from acquiring, solely as an investment, up to five percent (5%) of the outstanding shares of capital stock of any public corporation or working for a retail organization, provided that the Executive is not, directly or indirectly, engaged in a business relating to a Competitive Business.
6.2 Non-Solicitation Obligation. The Executive shall not, at any time during the Restricted Period, for her benefit or for the benefit of any other Person, solicit the employment or services of, or hire (or cause any Person to so solicit or hire), any person who upon the termination of the Executives employment hereunder, or within twelve (12) months prior thereto, was (a) employed by the Company or (b) a consultant to the Company. The restrictions in this Section 6.2 shall not apply to (i) general solicitations that are not specifically directed to employees of or consultants to the Company, (ii) at the request of a former employee, serving as an employment reference for such former employee, (iii) solicitations or hirings of former employees of the Company whose employment was terminated by the Company without Cause or who terminated their employment for Good Reason (as such terms are defined in the applicable employment agreement or, in the absence of such an agreement, as determined by a majority of the Board in its good faith discretion), or (iv) except as would constitute a breach of the covenants in Section 6.1, the solicitation or hiring of either Kip Tindell or Sharon Tindell following such executives termination of employment by the Company without Cause or by such executive for Good Reason (as such terms are defined in the applicable employment agreement).
6.3 Definition. As used in this Article VI, the term Company shall include the Company (as defined in the preamble hereof) and any of its direct or indirect subsidiaries.
6.4 Amendment. The provisions contained in Sections 6.1 and 6.2 may be altered and/or waived only with the prior written consent of a majority of the Board or the Compensation Committee.
ARTICLE VII.
NONDISCLOSURE OF PROPRIETARY INFORMATION
7.1 Nondisclosure. Except as required in the faithful performance of the Executives duties hereunder or pursuant to Section 7.3, the Executive shall, during the Term and after the Date of Termination, maintain in confidence and shall not directly or indirectly, use, disseminate, disclose or publish, or use for her benefit or the benefit of any Person, any confidential or proprietary information or trade secrets of or relating to the Company, including, without limitation, information with respect to the Companys operations, processes, protocols, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment (Proprietary Information), or deliver to any Person any document, record, notebook, computer program or similar repository of or containing any such Proprietary Information. The Executives obligation to maintain and not use, disseminate, disclose or publish, or use for her benefit or the benefit of any Person any Proprietary Information after the Date of Termination shall continue so long as such Proprietary Information is not, or has not by legitimate means become, generally known
and in the public domain (other than by means of the Executives direct or indirect disclosure of such Proprietary Information) and continues to be maintained as Proprietary Information by the Company. The parties hereby stipulate and agree that as between them, the Proprietary Information identified herein is important, material and affects the successful conduct of the businesses of the Company (and any successor or assignee of the Company). Notwithstanding anything herein to the contrary, during the Term and following the Date of Termination, each of the Executive and the Company shall retain the right to use the seven Foundation Principles described in the Companys news release, dated as of January 10, 2005, (with Communication Is Leadership having been added in 2008) without payment of royalties or other consideration, and nothing in this Agreement shall have any effect on the ownership of such Foundation Principles as of the Effective Date.
7.2 Return of Proprietary Information. Upon termination of the Executives employment with the Company for any reason, the Executive shall promptly deliver to the Company all Proprietary Information in the Executives possession, including without limitation all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Companys customers, business plans, marketing strategies, products or processes.
7.3 Response to Legal Process: Contents of Book. Notwithstanding Section 7.1, (a) the Executive may respond to a lawful and valid subpoena or other legal process relating to the Company or its business or operations; provided that the Executive shall: (i) give the Company the earliest possible notice thereof; (ii) as far in advance of the return date as possible, at the Companys sole cost and expense, make available to the Company and its counsel the documents and other information sought; and (iii) at the Companys sole cost and expense, assist such counsel in resisting or otherwise responding to such process, and (b) the disclosure of information, including Proprietary Information, in the Book (as defined in the Indemnification and Hold Harmless Agreement by and between Parent and Kip Tindell, dated as of June 13, 2012) currently being authored by Kip Tindell shall not violate or constitute a breach of this Agreement.
7.4 Non-Disparagement.
(a) The Executive agrees not to disparage the Company, any of its products or practices, or any of its directors, officers, agents, representatives, members or Affiliates, either orally or in writing, at any time; provided that the Executive may confer in confidence with her legal representatives and make truthful statements as required by law.
(b) The Company agrees to instruct the members of the Board and the executive officers of the Company not to disparage the Executive, either orally or in writing, at any time; provided that the Company may confer in confidence with its legal representatives and make truthful statements as required by law.
7.5 As used in this Article VII, the term Company shall include the Company (as defined in the preamble hereof), its parent, related entities, and any of its direct or indirect subsidiaries.
ARTICLE VIII.
REMEDIES
8.1 Acknowledgement: Blue Pencil. The Executive acknowledges and agrees that the benefits and payments provided under this Agreement represent adequate consideration for the Executives agreement to be bound by the restrictive covenants set forth in Articles VI and VII, that the Executives agreement to be bound by such restrictive covenants is a material inducement to the Companys entering into this Agreement. In the event, however, that any restrictive covenant set forth in Articles VI or VII shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it is the intention of the Executive and Company that it will be interpreted to extend only over the maximum period of time for which it may be enforceable, and/or over the maximum geographical area as to which it may be enforceable and/or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.
8.2 Injunctive Relief. The Executive acknowledges and agrees that a breach of the covenants contained in Articles VI or VII will cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Executive agrees that in the event of a breach of any of the covenants contained in Articles VI or VII, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief with any requirement to post a bond. The Company acknowledges and agrees that a breach of the covenants contained in Section 7.4(b) will cause irreparable damage to the Executive, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, the Company agrees that in the event of a breach of any of the covenants contained in Section 7.4(b), in addition to any other remedy which may be available at law or in equity, the Executive will be entitled to specific performance and injunctive relief without any requirement to post a bond.
ARTICLE IX.
MISCELLANEOUS
9.1 Assignment. The Company may assign its rights and obligations under this Agreement to any entity, including any successor to all or substantially all the assets of the Company, by merger or otherwise, and may assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its Affiliates. The Executive may not assign her rights or obligations under this Agreement to any individual or entity. This Agreement shall be binding upon and inure to the benefit of the Company, the Executive and their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable.
9.2 Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without reference to the principles of conflicts of law of New York or any other jurisdiction, and where applicable, the laws of the United States.
9.3 Notices. Any notice, request, claim, demand, document and other communication hereunder to any party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by telex, telecopy, or certified or registered mail, postage prepaid, as follows:
(a) If to the Company:
TCS Holdings, Inc.
500 Freeport Parkway
Coppell, TX 75019
ATTN: Kip Tindell, Chief Executive Officer
with a copy to:
Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suite 2000
Los Angeles, CA 90025
ATTN: Timothy Flynn
and a copy to:
Latham & Watkins LLP
885 Third Avenue
Suite 1000
New York, NY 10022
ATTN: Howard Sobel; Bradd Williamson
(b) If to the Executive, to the address set forth in the Companys records
or at any other address as any party shall have specified by notice in writing to the other party.
9.4 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.
9.5 Entire Agreement. The terms of this Agreement, the other agreements and instruments contemplated hereby or referred to herein, the Stockholders Agreement dated as of August 16, 2007, by and among Parent and the stockholders of Parent, and the Contribution and Subscription Agreement dated as of August 16, 2007, by and among Parent and certain stockholders of The Container Store, Inc., each as may be amended from time to time (collectively, the Related Agreements), are intended by the parties to be the final expression of their agreement with respect to the employment of the Executive by the Company and may not be contradicted by evidence of (and supersede) any prior or contemporaneous agreement (including without limitation the Prior Agreement and any term sheet or similar agreement entered into between the Company and the Executive). The parties further intend that this Agreement and the Related Agreements shall constitute the complete and exclusive statement of
their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement and the Related Agreements.
9.6 Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by the Executive and a duly authorized officer of Company and approved by a majority of the Board, which expressly identifies the amended provision of this Agreement. By an instrument in writing similarly executed and approved by a majority of the Board, the Executive or a duly authorized officer of the Company may waive compliance by the other party or parties with any provision of this Agreement that such other party was or is obligated to comply with or perform, provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure to comply or conform. No failure to exercise and no delay in exercising any right, remedy, or power hereunder shall preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.
9.7 No Inconsistent Action. The parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.
9.8 Construction. This Agreement shall be deemed drafted equally by both the parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary: (a) the plural includes the singular and the singular includes the plural; (b) and and or are each used both conjunctively and disjunctively; (c) any, all, each, or every means any and all, and each and every; (d) includes and including are each without limitation; (e) herein, hereof, hereunder and other similar compounds of the word here refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (f) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.
9.9 Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before an arbitrator in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction. Notwithstanding the foregoing, (a) the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of Articles VI or VII of this Agreement and the Executive hereby consents that such restraining order or injunction may be granted without requiring the Company to post a bond, and (b) the Executive shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any continuation of any violation of the provisions of
Section 7.4(b) of this Agreement and the Company hereby consents that such restraining order or injunction may be granted without requiring the Executive to post a bond. Only individuals who are: (i) lawyers engaged full-time in the practice of law and (ii) on the AAA register of arbitrators shall be selected as an arbitrator. Within twenty (20) days of the conclusion of the arbitration hearing, the arbitrator shall prepare written findings of fact and conclusions of law. It is mutually agreed that the written decision of the arbitrator shall be valid, binding, final and non-appealable, provided, however, that the parties hereto agree that the arbitrator shall not be empowered to award punitive damages against any party to such arbitration. The arbitrator shall require the non-prevailing party to pay the arbitrators full fees and expenses or, if in the arbitrators opinion there is no prevailing party, the arbitrators fees and expenses shall be borne equally by the parties thereto. In the event action is brought to enforce the provisions of this Agreement pursuant to this Section 9.9, the non-prevailing parties shall be required to pay the reasonable attorneys fees and expenses of the prevailing parties, except that if in the opinion of the court or arbitrator deciding such action there is no prevailing party, each party shall pay its own attorneys fees and expenses.
9.10 Enforcement. In the event any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect: (a) such provision shall be fully severable; (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a portion of this Agreement; and (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by such invalid, illegal or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such invalid, illegal or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in substance to such invalid, illegal or unenforceable provision as may be possible and be valid, legal and enforceable.
9.11 Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.
9.12 Employee Acknowledgment. The Executive acknowledges that she has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on her own judgment.
9.13 Section 409A.
(a) To the extent applicable, this Agreement shall be interpreted in accordance with Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event that a majority of the Board determines that any amounts payable pursuant to this Agreement may be subject to Section 409A, the Company may adopt such amendments to this Agreement or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate to: (i) exempt such payments from Section 409A and/or preserve the intended tax treatment of the benefits provided with respect to such payments or (ii) comply with the requirements of Section 409A and thereby avoid the application of penalty taxes under
Section 409A; provided that no such amendments, policies, procedures or actions shall reduce the economic value to the Executive of this Agreement from the value of this Agreement (without taking into account the effect of Section 409A) prior to the adoption or taking of such amendments, policies, procedures or actions. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from the Executive or any other individual to the Company or any of its Affiliates, employees or agents.
(b) To the extent that any installment payments under this Agreement are deemed to constitute nonqualified deferred compensation within the meaning of Section 409A, for purposes of Section 409A (including, without limitation, for purposes of Section 1.409A-2(b)(2)(iii) of the Department of Treasury Regulations), each such payment that the Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.
(c) To the extent that any reimbursements or corresponding in-kind benefits provided to the Executive under this Agreement (including, without limitation, the Health Payment and the Health Gross-Up Payment) are deemed to constitute deferred compensation within the meaning of Section 409A to the Executive, such amounts shall be paid or reimbursed reasonably promptly, but not later than December 31 of the year following the year in which the expense was incurred, and in any event in accordance with Section 1.409A-3(i)(1)(iv) of the Department of Treasury Regulations. The amount of any such payments or expense reimbursements in one calendar year shall not affect the expenses or in-kind benefits eligible for payment or reimbursement in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and the Executives right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.
9.14 Cooperation. During the Term hereof and thereafter, the Executive shall cooperate with the Company in any disputes with third parties, internal investigations or administrative, regulatory or judicial proceedings as reasonably requested by the Company and at the Companys sole cost and expense (including, without limitation, the Executive being available to the Company upon reasonable notice for interviews and factual investigations, at times and on schedules that are reasonably consistent with the Executives other permitted activities and commitments).
9.15 Indemnification. To the maximum extent allowed under applicable law and the Companys By-Laws and other corporate organizational documents, in the event that the Executive is a party to any threatened, pending or completed action, suit or proceeding (other than any action, suit or proceeding arising under or related to this Agreement or any other compensation agreement), whether civil, criminal, administrative or investigative, by reason of the fact that she is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, the Company shall indemnify the Executive and hold her harmless against all expenses (including reasonable and documented attorneys fees and costs incurred by the Executive), judgments, fines and amounts paid in settlement (subject to the Companys consent, with such consent not to be unreasonably
withheld) actually and reasonably incurred by her, as and when incurred, in connection with such action, suit or proceeding; provided that the Executive acted in good faith and in a manner she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Executive did not act in good faith and in a manner which she reasonably believed to be in or not opposed to the best interests of the Company, or that, with respect to any criminal action or proceeding, the Executive had reasonable cause to believe that her conduct was unlawful. The provisions of this Section 9.15 shall not be deemed exclusive of any other rights of indemnification to which the Executive may be entitled or which may be granted to her, and it shall be in addition to any rights of indemnification to which she may be entitled under any policy of insurance. These provisions shall continue in effect after Executive has ceased to be an officer or director of the Company.
9.16 No Mitigation. The Executive shall have no obligation to mitigate any payments due hereunder.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
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TCS HOLDINGS, INC. | ||
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By: |
/s/ Tim Flynn | |
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Name: |
Tim Flynn |
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Title: |
President |
[TCS Amended and Restated Employment Agreement with Melissa Reiff]
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EXECUTIVE | |
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By: |
/s/ Melissa Reiff |
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Melissa Reiff |
[TCS Amended and Restated Employment Agreement with Melissa Reiff]
EXHIBIT A
Historical Base Compensation, Target Bonus Compensation and Target Total Compensation
Fiscal Year |
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Base Compensation |
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Target Annual |
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Target Total |
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2011 |
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$ |
525,000 |
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$ |
650,000 |
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$ |
1,175,000 |
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2012 |
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$ |
550,000 |
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$ |
715,000 |
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$ |
1,265,000 |
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EXHIBIT B
Form of Release Agreement
Melissa Reiff (the Executive) agrees for the Executive, the Executives spouse and child or children (if any), the Executives heirs, beneficiaries, devisees, executors, administrators, attorneys, personal representatives, successors and assigns, hereby forever to release, discharge, and covenant not to sue TCS Holdings, Inc., a Delaware corporation (the Company), the Companys past, present, or future parent, affiliated, related, and/or subsidiary entities, and all of their past and present directors, shareholders, officers, general or limited partners, employees, agents, and attorneys, and agents and representatives of such entities, and employee benefit plans in which the Executive is or has been a participant by virtue of her employment with the Company, from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected, which the Executive has or may have had against such entities based on any events or circumstances arising or occurring on or prior to (or, with respect to claims of disparagement, arising or occurring on or prior to the date this release (the Release) is executed), arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever, (a) Executives employment with the Company or the termination thereof or (b) Executives status at any time as a holder of any securities of the Company, and any and all claims based on, relating to, or arising under federal, state, or local laws, including without limitation claims of discrimination, harassment, retaliation, wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, liability in tort, or for violation of public policy, claims of any kind that may be brought in any court or administrative agency, any claims arising under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Family and Medical Leave Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Texas Commission on Human Rights Act, the Texas Anti-Retaliation Act, the Texas Labor Code, the Sarbanes-Oxley Act, and similar state or local statutes, ordinances, and regulations; provided, however, notwithstanding anything to the contrary set forth herein, that this general release shall not extend to (i) benefit claims under employee pension benefit plans in which the Executive is a participant by virtue of her employment with the Company or to benefit claims under employee welfare benefit plans for occurrences (e.g., medical care, death, or onset of disability) arising after the execution of this Release by the Executive, and (ii) any obligation under this Release, or under that certain Amended and Restated Employment Agreement entered into on October , 2012 by and between the Company and the Executive, assumed by any party thereto.
The Executive understands that this Release includes a release of claims arising under the Age Discrimination in Employment Act (ADEA). The Executive understands and warrants that she has been given a period of twenty-one (21) days to review and consider this Release and such period shall not be affected or extended by any changes, whether material or immaterial, that might be made to this Release. The Executive is hereby advised to consult with
an attorney prior to executing the Release. By her signature below, the Executive warrants that she has had the opportunity to do so and to be fully and fairly advised by that legal counsel as to the terms of this Release. The Executive further warrants that she understands that she may use as much or all of her twenty-one (21)-day period as she wishes before signing, and warrants that she has done so.
The Executive further warrants that she understands that she has seven (7) days after signing this Release to revoke the Release by notice in writing to
. This Release shall be binding, effective, and enforceable upon both parties upon the expiration of this seven (7)-day revocation period without having received such revocation, but not before such time.
* * * * *
The Executive acknowledges and agrees that this Release is a legally binding document and the Executives signature will commit the Executive to its terms. Executive acknowledges and agrees that the Executive has carefully read and fully understands all of the provisions of this Release and that voluntarily enters into this Release by signing below. Upon execution, the Executive agree to deliver a signed copy of this Release to .
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Melissa Reiff | |
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Date: |
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Exhibit 10.8
EXECUTION VERSION
AMENDMENT No. 1, dated as of April 8, 2013 (this Amendment), to the Credit Agreement dated as of April 6, 2012, among THE CONTAINER STORE, INC., a Texas corporation (the Borrower), the Guarantors party thereto, the several banks and other financial institutions or entities from time to time parties to the Credit Agreement (the Lenders), JPMORGAN CHASE BANK, N.A., as Administrative Agent (the Administrative Agent), and the other parties thereto (as amended, restated, modified and supplemented from time to time, the Credit Agreement); capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
WHEREAS, the Borrower desires to amend the Credit Agreement on the terms set forth herein;
WHEREAS, Section 11.01 of the Credit Agreement provides that the relevant Loan Parties and the Required Lenders may amend the Credit Agreement and the other Loan Documents for certain purposes;
WHEREAS, (i) each Amendment No. 1 Consenting Lender (as defined in Exhibit A) has agreed, on the terms and conditions set forth herein, to have up to all of its outstanding Initial Loans (as defined in Exhibit A) (or, if less, the amount notified to such Lender by the Administrative Agent prior to the Amendment No. 1 Effective Date) converted into a like principal amount of a Term B Loan (as defined in Exhibit A) effective as of the Amendment No. 1 Effective Date (as defined below) and (ii) the Additional Term B Lender (as defined in Exhibit A) has agreed to provide an Additional Term B Commitment (as defined in Exhibit A) in a principal amount equal to $362,250,000 minus the principal amount of Initial Loans converted into Term B Loans on the Amendment No. 1 Effective Date, the proceeds of which shall be applied to repay in full the non-converted Initial Loans and to pay the Special Distribution;
NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1. Amendment. The Credit Agreement is, effective as of the Amendment No. 1 Effective Date (as defined below), 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 Exhibit A hereto. Additionally, each Lender hereto consents to the Administrative Agent and Collateral Agent effecting an amendment to the Intercreditor Agreement in the form of Exhibit B hereto.
Section 2. Representations and Warranties, No Default. In order to induce the Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, the Borrower represents and warrants to each Lender that:
a) After giving effect to this Amendment, each of the representations and warranties in the Credit Agreement and in the other Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date; and
b) At the time of and immediately after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing.
Section 3. Effectiveness. Section 1 of this Amendment shall become effective on the date (such date, if any, the Amendment No. 1 Effective Date) that the following conditions have been satisfied:
(i) Consents. The Administrative Agent shall have received executed signature pages hereto from Lenders constituting the Required Lenders;
(ii) Additional Joinder Agreement. The Administrative Agent, the Borrower and the Additional Term B Lender shall have entered into the Additional Term B Joinder Agreement (as defined in Exhibit A);
(iii) Amendment to ABL Credit Agreement and Intercreditor Agreement. The Administrative Agent shall have received copies of fully executed amendments to (x) the Intercreditor Agreement in the form of Exhibit B hereto and (y) the ABL Credit Agreement in the form of Exhibit C hereto and shall be satisfied that such amendments shall become effective on or prior to the Amendment No. 1 Effective Date.
(iv) Fees. The Borrower shall have paid (i) to the Amendment No. 1 Lead Arrangers (as defined in Exhibit A) in immediately available funds, all fees and expenses owing to Amendment No. 1 Lead Arrangers and due and payable on the Amendment No. 1 Effective Date as separately agreed to in writing by the Borrower and Amendment No. 1 Lead Arrangers, (ii) to the Administrative Agent for the account of the Amendment No. 1 Consenting Lenders, upfront fees on a pro rata basis equal to 0.25% of the aggregate principal amount of Converted Initial Loans, (iii) to the Administrative Agent for the account of the Additional Term B Lender, an up-front fee equal to 0.25% of the aggregate principal amount of the Additional Term B Commitments and (iv) to the extent invoiced prior to the Amendment No. 1 Effective Date, all reasonable out-of-pocket expenses of the Amendment No. 1 Lead Arrangers and the Administrative Agent in connection with this Amendment and the transaction contemplated hereby (including the reasonable fees and expenses of Cahill Gordon & Reindel LLP, counsel to the Amendment No. 1 Lead Arrangers and the Administrative Agent);
(v) Legal Opinions. The Administrative Agent shall have received a favorable legal opinion of Latham & Watkins LLP, counsel to the Loan Parties, and Swedish counsel to the Loan Parties covering such matters as the Administrative Agent may reasonably request and otherwise reasonably satisfactory to the Administrative Agent;
(vi) Officers Certificate. The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower dated the Amendment No. 1 Effective Date certifying that (a) after giving effect to this Amendment, each of the representations and warranties in the Credit Agreement and in the other Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date and (b) at the time of and immediately after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing;
(vii) Closing Certificates. The Administrative Agent shall have received (i) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Amendment and any other Loan Documents executed on behalf of such Loan Party and (ii) good standing or active status certificates, as applicable, of each Loan Party in its jurisdiction of organization and, to the extent reasonably requested by the Administrative Agent, bring-down good standing or active status certificates, as applicable;
(viii) Lien Searches. The Administrative Agent shall have received results of searches or other evidence reasonably satisfactory to the Collateral Agent (in each case dated as of a date reasonably satisfactory to the Collateral Agent) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Liens;
(ix) Committed Loan Notice. The Administrative Agent shall have received a Committed Loan Notice in accordance with the requirements of the Credit Agreement; and
(x) Repayment of Initial Loans. The Administrative Agent shall have received a notice of repayment from the Borrower in full of the Initial Loans which are not converted into Term B Loans on the Amendment No. 1 Effective Date (which may be conditioned upon the receipt by the Borrower of the Term B Loans pursuant to the Additional Term B Commitment).
Section 4. Counterparts. This Amendment 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. Delivery of an executed counterpart of a signature page to this Amendment by telecopier or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.
Section 5. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE OF NEW YORK.
Section 6. Headings. Section and Subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.
Section 7. Effect of Amendment. Except as expressly set forth herein, (i) this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders, the Administrative Agent or any other Agent, in each case under the Credit Agreement or any other Loan Document, and (ii) shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of either such agreement or any other Loan Document. Each and every term, condition, obligation, covenant and agreement contained in the Credit Agreement or any other Loan Document is hereby ratified and re-affirmed in all respects and shall continue in full force and effect. Each Loan Party reaffirms its obligations under the Loan Documents to which it is party and the validity of the
Liens granted by it pursuant to the Collateral Documents. This Amendment shall constitute a Loan Document for purposes of the Credit Agreement and from and after the Amendment No. 1 Effective Date, all references to the Credit Agreement in any Loan Document and all references in the Credit Agreement to this Agreement, hereunder, hereof or words of like import referring to the Credit Agreement, shall, unless expressly provided otherwise, refer to the Credit Agreement as amended by this Amendment. Each of the Loan Parties hereby (i) consents to this Amendment and the Additional Term B Joinder Agreement, (ii) confirms that all obligations of such Loan Party under the Loan Documents to which such Loan Party is a party shall continue to apply to the Credit Agreement as amended hereby and by the Additional Term B Joinder Agreement and (iii) agrees that all security interests granted by it pursuant to any Loan Document shall secure the Credit Agreement as amended by this Amendment and the Additional Term B Joinder Agreement.
Section 8. Submission To Jurisdiction; Waivers. Each of the parties hereto hereby irrevocably and unconditionally agrees that Section 11.14 of the Credit Agreement is incorporated herein mutatis mutandis.
[The remainder of this page is intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.
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THE CONTAINER STORE, INC., as Borrower | |
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By: |
/s/ Jodi Taylor |
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Name: Jodi Taylor |
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Title: Chief Financial Officer |
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TCS HOLDINGS, INC., | |
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TCS GIFT CARD SERVICES, LLC, | |
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TCS INSTALLATION SERVICES, LLC, | |
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each as a Guarantor | |
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By: |
/s/ Jodi Taylor |
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Name: Jodi Taylor |
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Title: Chief Financial Officer |
[Signature Page to Amendment]
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JPMORGAN CHASE BANK, N.A., | |
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as Administrative Agent and Collateral Agent | |
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By: |
/s/ David L. Howard |
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Name: David L. Howard |
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Title: Authorized Officer |
[Signature Page to Amendment]
EXHIBIT A
CREDIT AGREEMENT
$275,000,000362,250,000
Dated as of April 6, 20122012,
and as amended by Amendment No. 1 on April 8, 2013
among
THE CONTAINER STORE, INC.,
as Borrower,
THE GUARANTORS PARTY HERETO
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and Collateral Agent,
BARCLAYS BANK PLC,
MORGAN STANLEY SENIOR FUNDING, INC.
and
WELLS FARGO BANK, N.A.,
as Co-Documentation Agents,
and
THE OTHER LENDERS PARTY HERETO
J.P. MORGAN SECURITIES LLC,
BARCLAYS BANK PLC,
MORGAN STANLEY SENIOR FUNDING, INC.
and
WELLS FARGO SECURITIES, LLC,
as Joint Lead Arrangers and Joint Bookrunning Managers
and as Joint Lead Arrangers and Joint Bookrunning Managers for Amendment No. 1
TABLE OF CONTENTS
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Page |
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ARTICLE I | ||
DEFINITIONS AND ACCOUNTING TERMS | ||
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1.01 |
Defined Terms |
1 |
1.02 |
Other Interpretive Provisions |
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1.03 |
Accounting Terms |
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1.04 |
Rounding |
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1.05 |
Times of Day |
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1.06 |
Senior Debt |
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1.07 |
Available Amount Transactions |
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1.08 |
Pro Forma Calculations |
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ARTICLE II | ||
THE COMMITMENTS AND BORROWINGS | ||
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2.01 |
The Loans |
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2.02 |
Borrowings, Conversions and Continuations of Loans |
3 |
2.03 |
Prepayment |
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2.04 |
Termination or Reduction of Commitments |
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2.05 |
Repayment of Loans |
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2.06 |
Interest |
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2.07 |
Fees |
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2.08 |
Computation of Interest and Fees |
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2.09 |
Evidence of Debt |
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2.10 |
Payments Generally; Administrative Agents Clawback |
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2.11 |
Sharing of Payments by Lenders |
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2.12 |
Incremental Term Loan Commitments |
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2.13 |
Extended Term Loans |
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2.14 |
Loan Repricing Protection |
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ARTICLE III | ||
TAXES, YIELD PROTECTION AND ILLEGALITY | ||
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3.01 |
Taxes |
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3.02 |
Illegality |
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3.03 |
Inability to Determine Rates |
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3.04 |
Increased Costs; Reserves on LIBO Rate Loans |
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3.05 |
Compensation for Losses |
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3.06 |
Mitigation Obligations; Replacement of Lenders |
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3.07 |
Survival |
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ARTICLE IV | ||
CONDITIONS PRECEDENT TO BORROWINGS | ||
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4.01 |
Conditions of Initial Borrowing |
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Page |
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ARTICLE V | ||
REPRESENTATIONS AND WARRANTIES | ||
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5.01 |
Existence, Qualification and Power |
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5.02 |
Authorization; No Contravention |
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5.03 |
Governmental Authorization; Other Consents |
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5.04 |
Binding Effect |
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5.05 |
Financial Statements; No Material Adverse Effect; No Internal Control Event |
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5.06 |
Litigation |
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5.07 |
Ownership of Property; Liens; Investments |
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5.08 |
Environmental Matters |
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5.09 |
Taxes |
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5.10 |
ERISA Compliance |
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5.11 |
Subsidiaries; Equity Interests; Loan Parties |
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5.12 |
Margin Regulations; Investment Company Act |
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5.13 |
Disclosure |
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5.14 |
Compliance with Laws |
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5.15 |
Intellectual Property; Licenses, Etc. |
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5.16 |
Solvency |
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5.17 |
Casualty, Etc. |
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5.18 |
Labor Matters |
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5.19 |
Collateral Documents |
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5.20 |
USA PATRIOT Act |
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ARTICLE VI | ||
AFFIRMATIVE COVENANTS | ||
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6.01 |
Financial Statements and Other Reports |
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6.02 |
Certificates; Other Information |
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6.03 |
Notices |
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6.04 |
Payment of Obligations |
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6.05 |
Preservation of Existence, Etc. |
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6.06 |
Maintenance of Properties |
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6.07 |
Maintenance of Insurance |
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6.08 |
Compliance with Laws |
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6.09 |
Books and Records |
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6.10 |
Inspection Rights |
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6.11 |
Use of Proceeds |
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6.12 |
Covenant to Guarantee Obligations and Give Security |
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6.13 |
Further Assurances |
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6.14 |
Lenders Meetings |
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6.15 |
Designation as Senior Debt |
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6.16 |
Maintenance of Ratings |
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6.17 |
Designation of Subsidiaries |
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6.18 |
Post-Closing Matters |
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ARTICLE VII | ||
NEGATIVE COVENANTS | ||
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7.01 |
Liens |
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7.02 |
Indebtedness |
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7.03 |
Investments |
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7.04 |
Fundamental Changes |
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7.05 |
Dispositions |
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7.06 |
Restricted Payments |
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7.07 |
Change in Nature of Business |
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7.08 |
Transactions with Affiliates |
|
7.09 |
Burdensome Agreements |
|
7.10 |
Amendments of Material Indebtedness |
|
7.11 |
Accounting Changes |
|
7.12 |
Prepayments, Etc. of Indebtedness |
|
7.13 |
Holding Company |
|
7.14 |
Sale and Leaseback Transactions |
|
|
|
|
| ||
ARTICLE VIII | ||
EVENTS OF DEFAULT AND REMEDIES | ||
| ||
8.01 |
Events of Default |
|
8.02 |
Remedies upon Event of Default |
|
8.03 |
Application of Funds |
88 |
| ||
ARTICLE IX | ||
ADMINISTRATIVE AGENT | ||
| ||
9.01 |
Appointment and Authority |
|
9.02 |
Rights as a Lender |
|
9.03 |
Exculpatory Provisions |
|
9.04 |
Reliance by Agents |
|
9.05 |
Delegation of Duties |
|
9.06 |
Resignation of Agents |
|
9.07 |
Non-Reliance on Agents and Other Lenders |
|
9.08 |
No Other Duties, Etc. |
|
9.09 |
Administrative Agent May File Proofs of Claim |
|
9.10 |
Collateral and Guaranty Matters |
|
9.11 |
Notice of Transfer |
|
9.12 |
Agency for Perfection |
|
9.13 |
Indemnification of Agents |
|
9.14 |
Withholding Tax |
|
9.15 |
Relation Among Lenders |
|
| ||
ARTICLE X | ||
| ||
10.01 |
Guaranty |
|
|
|
Page |
|
|
|
10.02 |
Rights of Lenders |
|
10.03 |
Certain Waivers |
|
10.04 |
Obligations Independent |
|
10.05 |
Subrogation |
|
10.06 |
Termination; Reinstatement |
|
10.07 |
Subordination |
|
10.08 |
Stay of Acceleration |
|
10.09 |
Condition of Borrower |
|
| ||
ARTICLE XI | ||
MISCELLANEOUS | ||
| ||
11.01 |
Amendments, Etc. |
|
11.02 |
Notices; Effectiveness; Electronic Communications |
|
11.03 |
No Waiver; Cumulative Remedies |
|
11.04 |
Expenses; Indemnity; Damage Waiver |
|
11.05 |
Payments Set Aside |
|
11.06 |
Successors and Assigns |
|
11.07 |
Treatment of Certain Information; Confidentiality |
|
11.08 |
Right of Setoff |
|
11.09 |
Interest Rate Limitation |
|
11.10 |
Counterparts; Integration; Effectiveness |
|
11.11 |
Survival of Representations and Warranties |
|
11.12 |
Severability |
|
11.13 |
Replacement of Lenders |
|
11.14 |
Governing Law; Jurisdiction; Etc. |
|
11.15 |
WAIVER OF JURY TRIAL |
|
11.16 |
No Advisory or Fiduciary Responsibility |
|
11.17 |
USA PATRIOT Act Notice |
|
11.18 |
No Strict Construction |
|
11.19 |
Attachments |
|
11.20 |
Intercreditor Agreement |
|
|
|
|
SIGNATURES |
S-1 |
SCHEDULES
2.01 |
Commitments |
5.01 |
Organization Information |
5.07(c) |
Owned Real Estate |
5.07(d)(i) |
Leased Real Estate (Lessee) |
5.07(d)(ii) |
Leased Real Estate (Lessor) |
5.07(e) |
Existing Investments |
5.11 |
Subsidiaries and Other Equity Investments |
5.15 |
Intellectual Property Rights |
6.12 |
Guarantors |
7.01(b) |
Existing Liens |
7.02 |
Existing Indebtedness |
7.09 |
Burdensome Agreements |
11.02 |
Administrative Agents Office, Certain Addresses for Notices |
EXHIBITS
Form of
A-1 |
Committed Loan Notice |
A-2 |
Conversion/Continuation Notice |
B |
Discounted Prepayment Option Notice |
C |
Intercreditor Agreement |
D |
Compliance Certificate |
E |
Form of Note |
F |
Assignment and Assumption |
G |
Lender Participation Notice |
H-1 |
Perfection Certificate |
H-2 |
Perfection Certificate Supplement |
I |
Discounted Voluntary Prepayment Notice |
J-1 |
U.S. Tax Certificate For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes |
J-2 |
U.S. Tax Certificate For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes |
J-3 |
U.S. Tax Certificate For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes |
J-4 |
U.S. Tax Certificate For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes |
CREDIT AGREEMENT
This CREDIT AGREEMENT (Agreement) is entered into as of April 6, 2012,2012 (and amended by Amendment No. 1 on April 8, 2013), among THE CONTAINER STORE, INC., a Texas corporation (the Borrower), the Guarantors party hereto, each lender from time to time party hereto (collectively, the Lenders and individually, a Lender) and JPMORGAN CHASE BANK, N.A. (JPMCB), as Administrative Agent and Collateral Agent.
PRELIMINARY STATEMENTS:
The Borrower, a wholly owned Subsidiary of TCS Holdings, Inc. (Holdings), a Delaware corporation, has requested the Lenders to provide a $275.0 million senior secured term B loan facility (the Term Facility)of Initial Loans to finance a portion of the Transaction and the Lenders have indicated their willingness to lend, on the terms and subject to the conditions set forth herein.
Concurrently herewith, the Borrower will enter into the ABL Facility providing for credit extensions in an aggregate principal amount of up to $75.0 million.
The proceeds of the Term B Loans borrowed in respect of the Additional Term B Commitment shall be used on or about the Amendment No. 1 Effective Date to (i) repay the Initial Loans that are not Converted Initial Loans, (ii) pay the Special Distribution and (iii) pay fees and expenses incurred in connection with the consummation of the foregoing.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:
ABL Credit Agreement means the credit agreement governing the ABL Facility.
ABL Facility means the $75.0 million senior secured revolving facility dated as of the Closing Date among the Borrower, the guarantors party thereto, the lenders party thereto and JPMorgan, as administrative agent and collateral agent, as it may be amended or modified from time to time, including amendments increasing the principal amount of revolving loans available thereunder.
ABL Loan Documents means the credit agreement governing the ABL Facility, all mortgages and other security documents thereunder and the Notes issued thereunder.
ABL Obligations has the meaning specified in the Intercreditor Agreement.
ABL Priority Collateral has the meaning specified in the Intercreditor Agreement.
Acceptable Discount has the meaning provided in Section 2.03(d)(iii).
Acceptance Date has the meaning provided in Section 2.03(d)(ii).
Additional Credit Extension Amendment means an amendment to this Agreement (which may, at the option of the Administrative Agent, be in the form of an amendment and restatement
of this Agreement) providing for any Incremental Term Loans, Replacement Loans or Extended Term Loans which shall be consistent with the applicable provisions of this Agreement relating to Incremental Term Loans, Replacement Loans or Extended Term Loans and otherwise reasonably satisfactory to the Administrative Agent and the Borrower.
Additional Term B Commitment means, with respect to the Additional Term B Lender, its commitment to make a Term B Loan on the Amendment No. 1 Effective Date in an amount equal to $362,250,000 minus the aggregate principal amount of the Converted Initial Loans of all Lenders.
Additional Term B Joinder Agreement means the joinder agreement, dated the Amendment No. 1 Effective Date, by and among the Borrower, the Administrative Agent and the Additional Term B Lender.
Additional Term B Lender means the Person identified as such in the Additional Term B Joinder Agreement.
Administrative Agent means JPMCB in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
Administrative Agents Office means the Administrative Agents address and, as appropriate, account as set forth on Schedule 11.02, 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 means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
Agent Parties has the meaning specified in Section 11.02(c).
Agents means, collectively, the Administrative Agent and the Collateral Agent.
Aggregate Commitments means the sum of the Commitments of all the Lenders. As of the Closing Date, the Aggregate Commitments are $275.0 million. As of the Amendment No.1 Effective Date, the Aggregate Commitments are $362,250,000.
Agreement has the meaning specified in the introductory paragraph hereto, as amended, restated, modified or supplemented from time to time in accordance with the terms hereof.
Amendment No. 1 means Amendment No. 1 to this Agreement, dated as of April 8, 2013, by and among the Borrower, the Guarantors, the Administrative Agent, the Collateral Agent and the Lenders party thereto.
Amendment No. 1 Consenting Lender means each Lender that provided the Administrative Agent with a counterpart to Amendment No. 1 executed by such Lender.
Amendment No. 1 Effective Date has the meaning specified in Amendment No. 1.
Amendment No. 1 Lead Arrangers means J.P. Morgan Securities LLC, Barclays Bank PLC, Morgan Stanley Senior Funding, Inc. and Wells Fargo Securities, LLC, in their capacities as joint lead arrangers and joint bookrunning managers for Amendment No. 1.
Applicable Discount has the meaning provided in Section 2.03(d)(iii).
Applicable Margin means (i) in the case of LIBO Rate Loans, 5.004.25% per annum and (ii) in the case of Base Rate Loans, 4.00% per annum.3.25% per annum; provided that at any time that the Borrowers corporate family ratings and corporate credit ratings are at least B2 (stable or better) from Moodys and at least B (stable or better) from S&P each of the foregoing Applicable Margins pursuant to clause (i) and (ii) above shall be reduced by 50 basis points per annum. Any change in the Applicable Margin as a result of a change in the Borrowers corporate family ratings or corporate credit ratings shall become effective on the Business Day following the first public announcement of such change in ratings from the applicable ratings agency.
Approved Fund means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
Arrangers means J.P. Morgan Securities LLC, Barclays Bank PLC, Morgan Stanley Senior Funding, Inc. and Wells Fargo Securities, LLC, in their capacities as joint lead arrangers and joint bookrunning managers and the Amendment No. 1 Lead Arrangers.
Assignee Group means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.
Assignment and Assumption means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.06(b)(iii)), and accepted by the Administrative Agent, in substantially the form of Exhibit F or any other form approved by the Administrative Agent.
Attributable Indebtedness means, on any date, (a) in respect of any Capital Lease Obligations of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease or similar payments under the relevant lease or other applicable agreement or instrument that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease or other agreement or instrument were accounted for as a Capital Lease Obligation and (c) all Synthetic Debt of such Person.
Audited Financial Statements means the audited Consolidated balance sheets and related statements of income, stockholders equity and cash flows for the 2008, 2009 and 2010 Fiscal Years for Holdings ended February 28, 2009, February 27, 2010 and February 26, 2011 (including its Consolidated Subsidiaries) (in each case prepared in accordance with GAAP).
Available Amount means, at any time (the Reference Date), the sum of:
(a) an amount equal to (x) the cumulative amount of Excess Cash Flow (which amount shall not be less than zero in any Fiscal Year) for each Fiscal Year of the Borrower ending after the Closing Date minus (y) the portion of such Excess Cash Flow that has been (or is required to be) applied to the prepayment of Loans in accordance with Section 2.03(b)(i) (without regard to any optional prepayment of Loans); plus
(b) the amount of any capital contributions (other than from a Subsidiary) and the Net Cash Proceeds from Qualified Equity Issuances (other than a Specified Equity Contribution or any amount applied pursuant to Section 7.03(k)) received by the Borrower during the period from and including the Business Day immediately following the Closing Date through and including the Reference Date; plus
(c) to the extent the Borrower or a Restricted Subsidiary has made any Investment pursuant to Section 7.03(l), the net amount of any return on such Investment (whether through dividends, distributions, sale, cash repayments of principal, or other disposition of such Investment or the designation of an Unrestricted Subsidiary as a Restricted Subsidiary) actually received by the Borrower or a Restricted Subsidiary from such Investment; minus
(d) the aggregate amount of any Investments made pursuant to Sections 7.03(l), any Restricted Payment made pursuant to Section 7.06(e)(ii) or any payment made pursuant to Section 7.12(d) during the period commencing on the Closing Date and ending on the Reference Date (and, for purposes of this clause (d), without taking account of the intended usage of the Available Amount on such Reference Date in the contemplated transaction).
Bank Products means any services or facilities provided to any Loan Party by any Agent , Lender, Former Lender or any Affiliate of an Agent, Lender or Former Lender (but excluding Cash Management Services) on account of (a) Swap Contracts, (b) purchase cards and (c) merchant services constituting a line of credit.
Base Rate means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus ½ of 1%, (c) the LIBO Rate for a one month interest period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%, provided that, for the avoidance of doubt, the LIBO Rate for any day shall be based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute page) at approximately 11:00 a.m. London time on such day (without any rounding) and (d) 2.25%. Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Rate or the LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Rate or the LIBO Rate, respectively.
Base Rate Loan means a Loan that bears interest based on the Base Rate.
Borrower has the meaning specified in the introductory paragraph hereto.
Borrower Materials has the meaning provided in Section 6.02.
Borrowing means a borrowing consisting of simultaneous Loans of the same Type and, in the case of LIBO Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01(a) or Section 2.01(b), as applicable.
Business Day means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agents Office is located and, if such day relates to any LIBO Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank market.
Capital Expenditures means, with respect to any Person for any period, any expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal
replacements and maintenance which are properly charged to current operations) which is, or should be in accordance with GAAP, reflected as a capital expenditure in a Consolidated statement of cash flows of such Person for the period in which such expenditure occurs, provided that Capital Expenditures shall not include (a) any such expenditures which are contractually required to be, and are, reimbursed to the Loan Parties in cash by landlords with respect to such period of calculation, (b) any such expenditure with the proceeds from any casualty insurance or condemnation or eminent domain, to the extent that the proceeds therefrom are utilized for Capital Expenditures within twelve months of the receipt of such proceeds, (c) any such expenditure with the proceeds or consideration received from any trade in of any Loan Partys assets, or (d) any such expenditures which constitute a Permitted Acquisition.
Capital Lease Obligations means, with respect to any Person, the obligation of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP as in effect on the Closing Date, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP as in effect on the Closing Date.
Cash Equivalents means any of the following types of Investments, to the extent owned by Holdings, the Borrower, or any of their respective Restricted Subsidiaries:
(a) readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;
(b) time deposits with, or insured certificates of deposit or bankers acceptances of, any commercial bank that (i) (A) is a Lender that offers such deposits, certificates of deposit or bankers acceptances in the ordinary course of such Lenders business or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) of this definition and (iii) has combined capital and surplus of at least $1.0 billion, in each case with maturities of not more than 180 days from the date of acquisition thereof;
(c) commercial paper issued by any Person organized under the laws of any state of the United States of America and rated at least Prime-1 (or the then equivalent grade) by Moodys or at least A-1 (or the then equivalent grade) by S&P, in each case with maturities of not more than 180 days from the date of acquisition thereof;
(d) Investments, classified in accordance with GAAP as current assets of Holdings, the Borrower, or any of their respective Restricted Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, which are administered by financial institutions that have the highest rating obtainable from either Moodys or S&P, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in clauses (a), (b) and (c) of this definition; and
(e) in the case of any Foreign Subsidiary, investments of comparable tenor and credit quality to those described in the foregoing clauses (a) through (d) customarily utilized in countries in which such Foreign Subsidiary operates for short term cash management purposes.
Cash Management Services means any one or more of the following types of services or facilities provided to any Loan Party by any Agent, Lender, Former Lender or any Affiliate of an Agent, Lender or Former Lender: (a) ACH transactions, (b) cash management services, including, without limitation, controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) foreign exchange facilities, (d) credit or debit cards, and (e) merchant services not constituting a Bank Product.
CERCLA means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.
CERCLIS means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.
CFC means a Person that is a controlled foreign corporation under Section 957 of the Code.
Change in Law means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted or issued.
Change of Control means an event or series of events by which:
(a) at any time prior to the creation of a Public Market, the Sponsor, Affiliates of the Sponsor (other than any portfolio company thereof) and the Management Stockholders (collectively, the Permitted Holders) shall cease to own and control legally and beneficially, either directly or indirectly, equity securities in Holdings representing more than 50% of the combined voting power of all equity securities entitled to vote for members of the board of directors or equivalent governing body of Holdings on a fully-diluted basis (and taking into account all such securities that the Permitted Holders have the right to acquire pursuant to any option right (as defined in clause (b) below)); or
(b) at any time upon or after the creation of a Public Market, any person or group (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such Person or its subsidiaries, and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan that in each case is not acting in concert with another Person) other than the Permitted Holders becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have beneficial ownership of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an option right)), directly or indirectly, of the greater of (x) 35% or more of the equity securities of Holdings entitled to vote for members of the board of directors or equivalent governing body of Holdings on a fully-diluted basis (and taking into account all such securities that such person or group has
the right to acquire pursuant to any option right) and (y) a percentage that is greater than the percentage of the equity securities of Holdings entitled to vote for members of the board of directors or equivalent governing body of Holdings that is then beneficially owned by the Permitted Holders; or
(c) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of Holdings cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or
(d) Holdings shall cease, directly or indirectly, to own and control legally and beneficially all of the Equity Interests in the Borrower; or
(e) a change of control or any comparable term under, and as defined in, the ABL Loan Documents or any other instrument, document or agreement governing Material Indebtedness shall have occurred, in any case that gives the holders thereof the right to require Holdings or any of its Subsidiaries to repurchase, offer to repurchase or immediately repay such Indebtedness.
Class when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Initial Loans, Term Loans made by the Lenders to the Borrower pursuant to Section 2.01,B Loans, Incremental Term Loans of any series, Extended Term Loans of any series or Replacement Loans of any series.
Closing Date means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 11.01.
Code means the Internal Revenue Code of 1986, as amended.
Co-Documentation Agent means Barclays Bank PLC, Morgan Stanley Senior Funding, Inc. and Wells Fargo Bank, N.A., each in its capacity as co-documentation agent under any of the Loan Documents, or any successor co-documentation agent.
Collateral means all of the Collateral and Mortgaged Property or Trust Property, as applicable, referred to in the Collateral Documents and all of the other property that is or is intended under the terms of the Collateral Documents to be subject to Liens in favor of the Collateral Agent for the benefit of the Credit Parties.
Collateral Agent means JPMCB in its capacity as collateral agent under any of the Loan Documents, or any successor collateral agent as provided in Section 9.01(b).
Collateral Documents means, collectively, the Security Agreement, the Pledge Agreement, the Swedish Pledge Agreement, the Intellectual Property Security Agreement, the Mortgages, the Intercreditor Agreement, each of the Mortgages, collateral assignments, security agreements, pledge agreements, control agreements or other similar agreements delivered to the Collateral Agent pursuant to
Section 6.12, and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Credit Parties.
Commitment means, as to each Lender, its obligation to make Loans to the Borrower pursuant to Section 2.01 in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lenders name on Schedule 2.01 under the caption Commitment or in the applicable Additional Credit Extension Amendment or opposite the Commitment caption or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. Unless the context shall otherwise require, the term Commitment shall include the Incremental Term Loan Commitments and the Additional Term B Commitment.
Committed Loan Notice means a notice of a Borrowing, which, if in writing, shall be substantially in the form of Exhibit A-l.
Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
Compliance Certificate means a certificate substantially in the form of Exhibit D. with such modifications thereto as may be mutually agreed by the Administrative Agent and the Borrower to reflect the amendments to this Agreement pursuant to Amendment No. 1.
Consolidated means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.
Consolidated EBITDA means, at any date of determination, an amount equal to Consolidated Net Income of Holdings and its Restricted Subsidiaries for the most recently completed Measurement Period plus (a) the following to the extent deducted in calculating Consolidated Net Income for such Measurement Period: (i) Consolidated Interest Charges, (ii) the provision for Federal, state, local and foreign income taxes payable, (iii) depreciation and amortization expense, (iv) non-cash stock compensation paid to officers, directors, employees or consultants during such Measurement Period, (v) all non-cash losses from Dispositions during such Measurement Period, other than Dispositions of inventory in the ordinary course of business, (vi) Transaction Expenses, (vii) expenses incurred in connection with the prepayment, amendment, or refinancing of Indebtedness during such Measurement Period, (viii) non-cash expenses related to LIFO/LCM reserves and non-cash rent, (ix) any non-cash purchase accounting adjustments made in connection with any acquisition permitted by this Agreement, (x) Management Fees for such Measurement Period, (xi) expenses incurred during such Measurement Period in connection with closed stores, store closings, and store relocations in an amount not to exceed $5.0 million in the aggregate in such Measurement Period, (xii) all transactional costs, expenses and charges payable to non-Affiliated third parties and made at the time of, and in connection with, any acquisition (whether or not consummated) in an amount not to exceed $5.0 million in the aggregate during such Measurement Period, (xiii) any expenses or charges related to any issuance of Equity Interests, Investment, acquisition, disposition, recapitalization or the incurrence or repayment of Indebtedness (including with respect to Indebtedness, a refinancing thereof, whether or not successful), in each case permitted to be incurred or made hereunder and any amendment or modification to the terms of any such transactions, including such fees, expenses or charges related to the Transaction, (xiv) non-cash losses (minus any non-cash gains) with respect to Swap Contracts during such Measurement Period, (xv) extraordinary, unusual or non-recurring expenses, charges or losses during such period (as determined by the Borrower in good faith, it being understood that Item 10(e) of Regulation S-K under
the Securities Act shall not constitute a limitation on any such determination), and (xvi) pre-opening and grand opening expenses in an amount not to exceed $10.0 million in such Measurement Period; and minus (b) (i) to the extent included in calculating Consolidated Net Income for such Measurement Period, all non-recurring, non-cash items increasing Consolidated Net Income (excluding any non-cash items that result in an accrual of a reserve for cash items in any future period) (in each case of or by Holdings and its Restricted Subsidiaries for such Measurement Period), and (ii) non-cash gains from Dispositions other than Dispositions of inventory in the ordinary course of business, provided that Consolidated EBITDA shall be deemed to be $24,906,050, $7,621,086, $16,544,906 and $21,820,837 for the Fiscal Quarters ended February 26, 2011, May 28, 2011, August 27, 2011 and November 26, 2011, respectively (without pro forma adjustments for the acquisition of TCS Installation Services, LLC).
Consolidated Interest Charges means, for any Measurement Period, Consolidated interest expense (net of interest income) of Holdings and its Restricted Subsidiaries determined in accordance with GAAP.
Consolidated Leverage Ratio means, as of any date of determination, the ratio of (a) Total Debt as of such date to (b) Consolidated EBITDA for the most recently completed Measurement Period.
Consolidated Net Income means, at any date of determination, the net income (or loss) of Holdings and its Restricted Subsidiaries on a Consolidated basis for the most recently completed Measurement Period; provided that Consolidated Net Income shall exclude (a) extraordinary non-cash gains and extraordinary non-cash losses for such Measurement Period, (b) the net income of any Subsidiary during such Measurement Period to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such income is not permitted by operation of the terms of its Organization Documents or any agreement, instrument or Law applicable to such Subsidiary during such Measurement Period (provided that this clause (b) shall not, with respect to any Foreign Subsidiary, exclude income that can only be distributed following the adoption of the relevant annual accounts or Consolidated annual accounts for such Foreign Subsidiarys Fiscal Year), except that Consolidated Net Income shall be reduced to the extent of any equity held by Holdings or any of its Restricted Subsidiaries in any net loss of any such Subsidiary for such Measurement Period, (c) the income (or loss) of any Person during such Measurement Period and accrued prior to the date it becomes a Subsidiary of Holdings or its Restricted Subsidiaries or is merged into or Consolidated with Holdings or a Restricted Subsidiary or that Persons assets are acquired by Holdings or any of its Restricted Subsidiaries, (d) any income (or loss) for such period of any Person if such Person is not a Restricted Subsidiary of Holdings, except that Consolidated Net Income shall be increased by the aggregate amount of cash actually distributed by such Person during such Measurement Period to Holdings or a Restricted Subsidiary as a dividend or other distribution (and in the case of a dividend or other distribution to a Restricted Subsidiary which is not a Loan Party, such Restricted Subsidiary is not precluded from further distributing such amount to the Borrower as described in clause (b) of this proviso), and (e) the cumulative effect of changes in accounting principles.
Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto.
Conversion/Continuation Notice means a notice of (a) a conversion of Loans from one Type to the other, or (b) a continuation of LIBO Rate Loans, pursuant to Section 2.02(c), which, if in writing, shall be substantially in the form of Exhibit A-2.
Converted Initial Loan means each Initial Loan held by an Amendment No. 1 Consenting Lender on the Amendment No. 1 Effective Date immediately prior to the effectiveness of Amendment No. 1 (or, if less, the amount notified to such Lender by the Administrative Agent prior to the Amendment No. 1 Effective Date).
Credit Party means, individually, and Credit Parties means, collectively, the following: (a) the Lenders and their Affiliates, (b) the Agents, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.05, (c) the Arrangers, (d) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document, (e) any other Person to whom Obligations under this Agreement and other Loan Documents are owing and (f) the successors and assigns of each of the foregoing.
Credit Party Expenses means, without limitation, (a) all reasonable and documented in reasonable detail out-of-pocket expenses incurred by the Agents, the Arrangers, the Co-Documentation Agents and their respective Affiliates, in connection with this Agreement and the other Loan Documents, including without limitation (i) the reasonable and documented in reasonable detail fees, charges and disbursements of (A) counsel for the Agents and the Arrangers, provided that the Agents and the Arrangers shall be entitled to be reimbursed for no more than one counsel and, if reasonably necessary, for one local counsel in each relevant jurisdiction material to the interest of the Lenders, in each case, selected by the Agent, absent a conflict of interest between any of such Persons where the affected Persons inform the Borrower of such conflict, in which case the affected Persons may engage and be reimbursed for one additional counsel, (B) outside consultants for the Agents, (C) appraisers, and (D) all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations and (ii) in connection with (A) the syndication of the credit facilities provided for herein, (B) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (C) the enforcement or protection of their rights in connection with this Agreement or the Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral, or (D) any workout, restructuring or negotiations in respect of any Obligations and (b) all reasonable and documented in reasonable detail out-of-pocket expenses incurred by the Credit Parties who are not the Agents, the Arrangers, the Co-Documentation Agents or any Affiliate of any of them, after the occurrence and during the continuance of an Event of Default, provided that such Credit Parties shall be entitled to reimbursement for no more than one counsel representing all such Credit Parties (absent a conflict of interest between the Credit Parties, where the affected Credit Parties inform the Borrower of such conflict, in which case the Credit Parties may engage and be reimbursed for one additional counsel).
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 (i) the Base Rate plus (ii) the Applicable Margin applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a LIBO Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Loan plus 2% per annum.
Defaulting Lender means any Lender that (a) has failed to fund any portion of the Loans required to be funded by it hereunder within two Business Days of the date required to be funded by it hereunder, unless such Lender notifies the Administrative Agent in writing that such failure is the result of such Lenders good faith determination that a condition precedent to funding (specifically identified in writing, including, if applicable, by reference to a specific Default) has not been satisfied, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within two Business Days of the date when due, unless the subject of a good faith dispute, or (c) has become the subject of a bankruptcy or insolvency proceeding.
Discharge of ABL Obligations has the meaning specified in the Intercreditor Agreement.
Discounted Prepayment Option Notice has the meaning provided in Section 2.03(d)(ii).
Discounted Voluntary Prepayment has the meaning provided in Section 2.03(d)(i).
Discounted Voluntary Prepayment Notice has the meaning provided in Section 2.03(d)(v).
Disposition or Dispose means the sale, transfer, license, lease, or other disposition (including any sale and leaseback transaction) of any property (including, without limitation, any Equity Interests or Disqualified Equity Interests of any other Person held by a specified Person) 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, in each case, resulting in consideration to such Person (including assumption of liabilities) for any such transaction or series of related transactions in excess of $1.0 million.
Disqualified Equity Interests means any Equity Interests of any Person that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, (a) matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, in each case prior to the six month anniversary of the Maturity Date, (b) requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case prior to the six month anniversary of the Maturity Date, or (c) is convertible into or exchangeable for debt securities or for any Equity Interest referred to in clause (a) above, in each case at any time prior to the six month anniversary of the Maturity Date.
Dollar and $ mean lawful money of the United States.
Domestic Subsidiary means any Subsidiary that is organized or existing under the laws of the United States, any state thereof or the District of Columbia.
Eligible Assignee means (a) a Credit Party or any of its Affiliates; (b) a bank, insurance company, or company engaged in the business of making commercial loans, which Person, together with its Affiliates, has a combined capital and surplus in excess of $250.0 million; (c) an
Approved Fund; (d) any Person to whom a Credit Party assigns its rights and obligations under this Agreement as part of an assignment and transfer of such Credit Partys rights in and to a material portion of such Credit Partys portfolio of term loan credit facilities and (e) any other Person (other than a natural person) approved by (i) the Administrative Agent and (ii) unless an Event of Default under Section 8.01(a) or 8.01(f) has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, Eligible Assignee shall not include a Loan Party or any of the Loan Parties Affiliates or Subsidiaries (other than a Sponsor Affiliated Lender).
Environmental Laws means any and all Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, common law, judgments, orders, decrees, permits, concessions, grants, franchises or licenses, relating to pollution or the protection of the environment or the Release or threat of Release of any hazardous substances, materials or wastes (including Hazardous Materials) into the environment or human health (to the extent related to exposure to Hazardous Materials), or generation, storage, treatment, transport or handling of any Hazardous Materials.
Environmental Liability means any liability, whether pending or threatened (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Restricted Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
Environmental Permit means any permit, approval, identification number, license or other authorization required under any Environmental Law.
Equity Interests means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
Equity Investors means Holdings, the Sponsor and the Management Stockholders.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate means any entity under common control with which Holdings or the Borrower would be treated as a single employer within the meaning of Section 414 of the Code.
ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by Holdings, the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) with respect to any Pension Plan, a failure to satisfy the minimum funding standard under Sections 412 and 430 of the Code or Sections 302 and 303 of ERISA, whether or not
waived; (d) a determination that any Pension Plan is, or is expected to be, in at-risk status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code); (e) a complete or partial withdrawal (within the meanings of Sections 4203 and 4205 of ERISA) by Holdings, the Borrower or any ERISA Affiliate from a Multiemployer Plan or receipt by Holdings or the Borrower of notice from any Multiemployer Plan that it is insolvent or in reorganization (within the meanings of Sections 4241 and 4245 of ERISA) or in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 of ERISA); (f) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate under Section 4042 of ERISA a Pension Plan or Multiemployer Plan; (g) the appointment of a trustee to administer under Section 4042 of ERISA any Pension Plan or Multiemployer Plan; or (h) with respect to any Pension Plan the imposition of a lien or the posting of a bond or other security pursuant to Section 436(f) of the Code or Section 206(g)(5) of ERISA.
Event of Default has the meaning specified in Section 8.01. An Event of Default shall be deemed to be continuing unless and until that Event of Default has been duly waived as provided in Section 11.01.
Excess Cash Flow means, for any Fiscal Year of Holdings, the sum (without duplication) of:
(a) the Consolidated Net Income (or loss) of Holdings and its Restricted Subsidiaries for such Fiscal Year, adjusted (i) to exclude any gains or losses attributable to any events as a result of which a mandatory prepayment (other than from Excess Cash Flow) of the Facility is required and (ii) to subtract the amount, if any, by which taxes paid or required to be paid in cash with respect to such Fiscal Year exceeds the amount of taxes deducted in calculating Consolidated Net Income and to add the amount, if any, by which taxes paid or required to be paid with respect to such Fiscal Year in cash are less than the amount deducted in calculating Consolidated Net Income; plus
(b) depreciation, amortization and other non-cash charges or losses deducted in determining such Consolidated Net Income (or loss) for such Fiscal Year; plus
(c) the amount, if any, by which Net Working Capital decreased during such Fiscal Year (except as a result of the reclassification of items from short-term to long-term or vice-versa); minus
(d) the amount, if any, by which Net Working Capital increased during such Fiscal Year (except as a result of the reclassification of items from short-term to long-term or vice-versa); minus
(e) cash expenditures of Holdings and its Restricted Subsidiaries for and incurred in connection with Permitted Acquisitions or Investments pursuant to Section 7.03(l) during such Fiscal Year (except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in Consolidated Net Income (or loss) for such Fiscal Year); minus
(f) permanent repayments of Indebtedness (including any premium, make-whole or other penalty associated therewith) other than, solely for the purposes of Section 2.03(b), Indebtedness hereunder, made in cash by the Restricted Subsidiaries during such Fiscal Year and permitted hereunder, but only to the extent that the Indebtedness so prepaid by its terms cannot
be reborrowed or redrawn and such prepayments do not occur in connection with a refinancing of all or any portion of such Indebtedness; minus
(g) 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; minus
(h) the amount expended in respect of voluntary prepayments of Loans made pursuant to Section 2.03(d) (other than in connection with a refinancing); minus
(i) Restricted Payments made in cash by the Borrower during such Fiscal Year pursuant to Section 7.06(c) or (d); minus
(j) Capital Expenditures actually made in cash by Holdings and its Restricted Subsidiaries in such Fiscal Year (except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in Consolidated Net Income (or loss) for such Fiscal Year); minus
(k) any non-cash gains included in determining such Consolidated Net Income (or loss) for such Fiscal Year.
Excluded Swap Obligation means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Partys failure for any reason to constitute an eligible contract participant as defined in the Commodity Exchange Act and the regulations thereunder at the time such Loan Partys obligations under the last paragraph of Section 10.01 become effective with respect to such related Swap Obligation.
Excluded Taxes means, with respect to the Agents, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), franchise taxes imposed on it (in lieu of net income taxes) and branch profits taxes (or similar taxes) imposed by a jurisdiction (or any political subdivision thereof) as a result of such recipient being organized or resident in, maintaining a Lending Office in, or doing business in such jurisdiction, (b) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 11.13), any U.S. federal withholding tax to the extent imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01; (c) taxes attributable to a Lenders failure to comply with Section 3.01(e) or (f) and (d) any U.S. federal withholding tax imposed as a result of such recipients failure to establish a complete exemption under FATCA.
Existing ABL Facility means the credit agreement governing the $75.0 million senior secured revolving facility dated as of August 16, 2007, among the Borrower, the guarantors party thereto, the lenders party thereto and JPMorgan as administrative agent and collateral agent, as amended or modified from time to time.
Existing Mezzanine Notes means the Borrowers $150.0 million mezzanine notes issued under the existing Mezzanine Securities Purchase Agreement dated August 16, 2007, as amended and any exchange notes issued in replacement therefor.
Existing Term Loan Class has the meaning set forth in Section 2.13(a).
Existing Term Loan Facility means the credit agreement governing the $125.0 million senior secured term loan facility dated as of August 16, 2007, among the Borrower, the guarantors party thereto, the lenders party thereto and JPMorgan as administrative agent and collateral agent, as amended or modified from time to time.
Extended Term Loans has the meaning set forth in Section 2.13(a).
Extending Term Lender has the meaning set forth in Section 2.13(c).
Extension Election has the meaning set forth in Section 2.13(c).
Extension Request has the meaning provided in Section 2.13(a).
Extraordinary Receipt means any cash received by or paid to any Person in respect of proceeds of insurance (other than (i) proceeds of business interruption insurance to the extent such proceeds constitute compensation for lost earnings and (ii) in respect of any leased property (or assets located on such leased property) to the extent that such proceeds are required to be paid to the landlord of such Person pursuant to the terms of the Lease for such leased property) and condemnation awards (and payments in lieu thereof), in each case, to the extent the amount of cash received by or paid to such person is at least $1.0 million.
Facility means the Commitments and Loans under this Agreement.
FATCA means Sections 1471 through 1474 of the Code as in effect on the date hereof (including, for the avoidance of doubt, any agreements between governmental authorities implementing such provisions) or any successor provision that is substantively comparable and not materially more onerous to comply with, and, in each case, any current or future regulations promulgated thereunder or official interpretations thereof.
Federal Funds Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to JPMorgan on such day on such transactions as determined by the Administrative Agent.
First Priority means, with respect to any Lien purported to be created on any Collateral pursuant to any Collateral Document, that such Lien is the most senior Lien to which such Collateral is subject (subject to (i) in the case of Mortgages, Permitted Encumbrances, and (ii) otherwise, Permitted Liens).
Fiscal Month means any fiscal month of any Fiscal Year.
Fiscal Quarter means any fiscal quarter of any Fiscal Year.
Fiscal Year means any period of twelve consecutive months ending on the last Saturday of February in each calendar year (except for 53-week years).
Flood Documentation means, with respect to each Mortgaged Property located in the United States or any territory thereof, (i) a completed life-of-loan Federal Emergency Management Agency standard flood hazard determination (together with a notice about Special Flood Hazard Area status and flood disaster assistance duly executed by the Borrower and the applicable Loan Party relating thereto) and (ii) a copy of, or a certificate as to coverage under, and a declaration page relating to, the insurance policies required by Section 6.07 hereof and the applicable provisions of the Collateral Documents, each of which shall (A) be endorsed or otherwise amended to include a standard or New York lenders loss payable or mortgagee endorsement (as applicable), (B) name the Collateral Agent, on behalf of the Credit Parties, as additional insured and loss payee/mortgagee and (C) identify the address of each property located in a Special Flood Hazard Area, the applicable flood zone designation and the flood insurance coverage and deductible relating thereto and (iv) be otherwise in form and substance reasonably satisfactory to the Administrative Agent.
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 statue 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 Lender means any Lender that is not, for U.S. federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation, partnership or other entity treated as a corporation or partnership created or organized in or under the laws of the United States, or any political subdivision thereof, (iii) an estate whose income is subject to U.S. federal income taxation regardless of its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of such trust. In addition, solely for purposes of clause (b) of the definition of Excluded Taxes, a Foreign Lender shall include a partnership or other entity treated as a partnership created or organized in or under the laws of the United States, or any political subdivision thereof, but only to the extent the partners of such partnership (including indirect partners if the direct partners are partnerships or other entities treated as partnerships for U.S. federal income tax purposes created or organized in or under the laws of the United States, or any political subdivision thereof) are treated as Foreign Lenders under the preceding sentence.
Foreign Plan means any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by, or entered into with, Holdings, the Borrower or any Subsidiary with respect to employees employed by Holdings, the Borrower or any Subsidiary outside the United States that is not subject to the laws of the United States.
Foreign Subsidiary means any Subsidiary that is not a Domestic Subsidiary.
Former Lender means any Person that was a Lender but that has assigned all of its Loans and Commitments, and no longer holds any Loans and Commitments and, at the time of such assignment, was, or an Affiliate of such Lender was, a counterparty under any agreement with respect to Bank Products or Cash Management Services with any Loan Party, which agreements relating to Bank Products or Cash Management Services have not expired, been paid out or otherwise terminated or renewed.
FRB means the Board of Governors of the Federal Reserve System of the United States.
Fund means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
GAAP means generally accepted accounting principles in the United States, as in effect from time to time; provided, however, that if the Borrower notifies the Administrative Agent that the Borrower requests 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 provisions (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).
Guarantee means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the primary obligor) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to, with respect to clause (a) above, 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 or, with respect to clause (b) above, the fair market value of the property subject to (or contemplated to be subject to) such Lien as determined by the guaranteeing Person in good faith. The term Guarantee as a verb has a corresponding meaning.
Guarantors means, collectively, Holdings, the Subsidiary Guarantors listed on Schedule 6.12 and each other Restricted Subsidiary of Holdings that is required to sign a counterpart to this Agreement pursuant to Section 6.12(a)(i).
Guaranty means the guaranty contained in Article X hereof made by the Guarantors in favor of the Credit Parties.
Hazardous Materials means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated or defined as hazardous or toxic (or words of similar import) pursuant to any Environmental Law.
Holdings has the meaning specified in the Preliminary Statements.
IFRS means International Financial Reporting Standards and applicable accounting requirements set by the International Accounting Standards Board or any successor thereto (or the Financial Accounting Standards Board, the Accounting Principles Board of the American Institute of Certified Public Accountants, or any successor to either such Board, or the SEC, as the case may be), as in effect from time to time.
Incremental Term Borrowing means a Borrowing comprised of Incremental Term Loans.
Incremental Term Lender means a Lender with an Incremental Term Loan Commitment or an outstanding Incremental Term Loan.
Incremental Term Loan Amount means, at any time, the excess, if any, of (a) $50.0 million over (b) the aggregate amount of all Incremental Term Loan Commitments (other than in respect of Refinancing Term Loans) established prior to such time pursuant to Section 2.12.
Incremental Term Loan Commitment means the commitment of any Lender, established pursuant to Section 2.12, to make Incremental Term Loans to the Borrower.
Incremental Term Loans means Loans made by one or more Lenders to the Borrower pursuant to Section 2.01(b). Incremental Term Loans may be made in the form of additional Term Loans or, to the extent permitted by Section 2.12 and provided for in the relevant Additional Credit Extension Amendment, Other Term Loans.
Indebtedness means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) the maximum amount (after giving effect to any prior drawings or reductions that may have been reimbursed) of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial letters of credit), bankers acceptances, bank guaranties, surety bonds and similar instruments;
(c) net obligations of such Person under Swap Contracts;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business which are being disputed in good faith by appropriate proceedings or which are not past due for more than 120
days after the date on which such trade account was created, any bona fide earn-out obligation or purchase price adjustment until such obligation is not paid after becoming due and payable and accounts for payroll and other liabilities in the ordinary course of business);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) all Attributable Indebtedness in respect of Capital Lease Obligations and Synthetic Lease Obligations of such Person and all Synthetic Debt of such Person;
(g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and
(h) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of outstanding Indebtedness as of any date shall be the principal amount or accreted value thereof at such date.
Indemnified Taxes means 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.
Indemnitee has the meaning specified in Section 11.04(b).
Independent Financial Advisor means an accounting, appraisal, investment banking firm or consultant of nationally recognized standing that is, in the good faith judgment of the Borrower, qualified to perform the task for which it has been engaged and that is independent of the Borrower and its Affiliates.
Initial Loans means the term loans made by the Lenders on the Closing Date to the Borrower.
Information has the meaning specified in Section 11.07.
Information Memorandum means the Confidential Offering Memorandum dated March 2012 used by the Arrangers in connection with the syndication of the Commitments.
Intellectual Property means all present and future: trade secrets, know-how and other proprietary information; trademarks, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans, indicia of origin, and other source and/or business identifiers, and all registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights and copyright applications; unpatented inventions (whether or not patentable); patents and
patent applications; license agreements related to any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.
Intercreditor Agreement means an intercreditor agreement substantially in the form of Exhibit C.
Interest Payment Date means (a) as to any LIBO Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date or the Incremental Term Loan Maturity Date, as applicable; provided, however, that if any Interest Period for a LIBO Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the first Business Day after the end of each calendar quarter and the Maturity Date or the Incremental Term Loan Maturity Date, as applicable; provided, further, that the Amendment No. 1 Effective Date shall constitute an Interest Payment Date with respect to accrued and unpaid interest up to but excluding the Amendment No. 1 Effective Date for the Initial Loans (including the Converted Initial Loans).
Interest Period means, as to each LIBO Rate Loan, the period commencing on the date such LIBO Rate Loan is disbursed or converted to or continued as a LIBO Rate Loan and, except as contemplated by Section 2.01, ending on the date one, two, three or six months thereafter (or such other period as agreed by the Borrower and all applicable Lenders), as selected by the Borrower in its Committed Loan Notice or Conversion/Continuation Notice, as the case may be; 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 next preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period;
(c) no Interest Period longer than one month may be selected prior to the date that is the 30th day following the Closing Date; and
(d) no Interest Period shall extend beyond the Maturity Date.
Investment means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the assets of another Person or of the assets of another Person that constitute a discrete business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested (measured at the time made), without adjustment for subsequent increases or decreases in the value of such Investment.
IRS means the United States Internal Revenue Service.
JPMCB means JPMorgan Chase Bank, N.A.
Laws means, collectively, all international, foreign, Federal, state and local statutes, laws (including common law), treaties, rules, guidelines, regulations, judgments, ordinances, codes and
administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
Lease means any agreement, whether written or oral, no matter how styled or structured, pursuant to which a Loan Party is entitled to the use or occupancy of any space in a structure, land, improvements or premises for any period of time.
Lender has the meaning specified in the introductory paragraph hereto and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a Lender.
Lender Participation Notice has the meaning provided in Section 2.03(d)(iii).
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.
LIBO Rate means the higher of (a) for any Interest Period with respect to a LIBO Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (BBA LIBOR), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two 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 and (b) 1.25% per annum. If such rate is not available at such time for any reason, then the LIBO Rate for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBO Rate Loan being made, continued or converted by JPMorgan and with a term equivalent to such Interest Period would be offered by JPMorgans London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.
LIBO Rate Loan means a Loan that bears interest at a rate based on the LIBO Rate.
Lien means any mortgage, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), charge, preference, or priority in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to Real Estate, and any financing lease having substantially the same economic effect as any of the foregoing).
Liquidation means the exercise by the Administrative Agent or Collateral Agent of those rights and remedies accorded to such Agents under the Loan Documents and applicable Law as a creditor of the Loan Parties with respect to the realization on the Collateral, including (after the occurrence and continuation of an Event of Default) the conduct by the Loan Parties acting with the consent of the Administrative Agent, of any public, private or going out of business sale or other disposition of the Collateral for the purpose of liquidating the Collateral. Derivations of the word Liquidation (such as Liquidate) are used with like meaning in this Agreement.
Loan Documents means, collectively, (a) this Agreement, (b) the Notes, (c) the Collateral Documents and (d) each Additional Credit Extension Amendment.
Loan Parties means, collectively, the Borrower and each Guarantor.
Loans means the Initial Loans, Term B Loans, Incremental Term Loans, Extended Term Loans and Replacement Loans.
Management Agreement means the Amended and Restated Management Services Agreement dated as of September 1, 2011 between Leonard Green & Partners, L.P. (or any Affiliate of Leonard Green & Partners, L.P. to which such agreement has been assigned) and the Borrower as in effect as of the Closing Date or as amended in any manner not materially adverse to the Lenders.
Management Fees means all fees and expense reimbursements payable to Leonard Green & Partners, L.P. or any of its controlled Affiliates pursuant to the Management Agreement.
Management Stockholders means the members of management of Holdings or any of its Subsidiaries who are investors in Holdings or any direct or indirect parent thereof on the Closing Date.
Material Adverse Effect means (a) any change, circumstance, event or effect that would be materially adverse to the assets, liabilities, business, financial condition or results of operations of Holdings and its Restricted Subsidiaries taken as a whole; (b) a material impairment of the rights and remedies of the Administrative Agent, the Collateral Agent or any Lender under any Loan Document, or of the ability of any of Holdings, the Borrower or any Material Subsidiary to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any of Holdings, the Borrower or any Material Subsidiary of any Loan Document to which it is a party.
Material Indebtedness means Indebtedness (other than the Obligations) of any of the Holdings or any of its Restricted Subsidiaries in an aggregate principal amount exceeding $10.0 million for all such Persons. For purposes of determining the amount of Material Indebtedness at any time, the amount of the obligations in respect of any Swap Contract at such time shall be calculated at the Swap Termination Value thereof.
Material Subsidiary means, at any date of determination, any Restricted Subsidiary or group of Restricted Subsidiaries (a) whose total assets at the last day of the most recently ended Measurement Period were equal to or greater than 5% of the Consolidated total assets of Holdings and its Consolidated Subsidiaries at such date, or (b) whose gross revenues for such Measurement Period were equal to or greater than 5% of the Consolidated gross revenues of Holdings and its Consolidated Subsidiaries for such period, in each case determined in accordance with GAAP.
Maturity Date means April 6, 2019.
Maximum Rate has the meaning specified in Section 11.09.
Measurement Period means, at any date of determination, the most recently completed four consecutive Fiscal Quarters of Holdings and its Restricted Subsidiaries for which financial statements pursuant to Section 6.01(a) or (b) have been, or were required to have been, delivered for the applicable fiscal period (or, in the case of any calculation made prior to the first such delivery, the four Fiscal Quarter period ended November 16, 2011).
Moodys means Moodys Investors Service, Inc. and any successor thereto.
Mortgage means any deed of trust, trust deed, deed to secure debt, mortgage or other similar instrument, as applicable, creating a real property Lien on and security interest in Real Estate in favor of Collateral Agent on behalf of the Credit Parties, in each case in form and substance reasonably satisfactory to the Administrative Agent and its counsel.
Mortgage Policy has the meaning specified in Section 6.12(b).
Mortgaged Property means each parcel of Real Estate owned in fee by any Loan Party, if any, which shall be subject to a Mortgage pursuant to Section 6.12.
Multiemployer Plan means a multiemployer plan as defined in Section 4001(a)(3) of ERISA, to which Holdings, the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions on behalf of participants who are or were employed by any of them.
Net Cash Proceeds means:
(a) with respect to any Disposition by Borrower or any of its Restricted Subsidiaries, or any Extraordinary Receipt received or paid to the account of Holdings or any of its Restricted Subsidiaries, the excess, if any, of (i) the sum of cash and Cash Equivalents received in connection with such transaction (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (ii) the sum of (A) the principal amount of any Indebtedness (plus any premium or other required payment on account thereof) that is secured by a Lien having priority over the Lien of the Collateral Agent (if any) on the applicable asset and that is required to be repaid in connection with such transaction (other than Indebtedness under the Loan Documents, but including, the payment of the proceeds from any ABL Priority Collateral in reduction of the Indebtedness under the ABL Facility) plus, in the case of any Disposition by a Foreign Subsidiary or an Extraordinary Receipt received by a Foreign Subsidiary, the principal amount of Indebtedness (if any) of such Foreign Subsidiary or other Foreign Subsidiaries proposed to be repaid with such Net Cash Proceeds and (B) the reasonable out-of-pocket expenses incurred by Borrower or such Restricted Subsidiary in connection with such transaction; and
(b) with respect to the incurrence or issuance of any Refinancing Indebtedness or Indebtedness not permitted to be incurred or issued pursuant to Section 7.02 by Borrower or any Restricted Subsidiary, the excess, if any, of (i) the sum of the cash and Cash Equivalents received in connection with such incurrence or issuances over (ii) the investment banking fees, underwriting discounts, commissions, costs and other out-of-pocket expenses and other customary expenses, incurred by Borrower or such Restricted Subsidiary in connection with such incurrence or issuance.
Net Working Capital means, at any date, (a) the Consolidated current assets of Holdings and its Restricted Subsidiaries as of such date (excluding cash and current assets in respect of income taxes) minus (b) the Consolidated current liabilities of Holdings and its Restricted Subsidiaries as of such date (excluding current liabilities in respect of Indebtedness and deferred income taxes). Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.
Note means a promissory note made by the Borrower in favor of a Lender, evidencing Loans made by such Lender, substantially in the form of Exhibit E.
NPL means the National Priorities List under CERCLA.
Obligations means (a) all debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan (including any Other Term 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 or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding and (b) any Other Liabilities, excluding, with respect to any Guarantor that is not a Qualified ECP Guarantor, Excluded Swap Obligations of such Guarantor.
Offered Loans has the meaning provided in Section 2.03(d)(iii).
Organization Documents means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, limited 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.
Other Liabilities means amounts due on account of or arising from (a) any Cash Management Services furnished to any of the Loan Parties and (b) any transaction which arises out of any Bank Product entered into with any of the Loan Parties, as each may be amended from time to time.
Other Taxes means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including any interest, additions to tax or penalties applicable thereto) arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
Other Term Loans has the meaning specified in Section 2.12(a).
Participant has the meaning specified in Section 11.06(d).
Participant Register has the meaning specified in Section 11.06(d).
PBGC means the Pension Benefit Guaranty Corporation.
PCAOB means the Public Company Accounting Oversight Board.
Pension Plan, means any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Section 412 of the Code or Title IV of ERISA and is sponsored or maintained by Holdings, the Borrower or any ERISA Affiliate or to which Holdings, the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years on behalf of participants who are or were employed by any of them.
Perfection Certificate means a certificate in the form of Exhibit H-1 or any other form approved by the Collateral Agent, as the same shall be supplemented from time to time by a Perfection Certificate Supplement or otherwise.
Perfection Certificate Supplement means a certificate supplement in the form of Exhibit H-2 or any other form approved by the Collateral Agent.
Permitted Acquisition has the meaning assigned to such term in Section 7.03(h).
Permitted Encumbrances has the meaning specified in the Mortgages.
Permitted Holdco Debt means Indebtedness of Holdings that (A) is not subject to any Guarantee by the Borrower or any other Restricted Subsidiary, (B) will not mature prior to the date that is 180 days after the Maturity Date, (C) has no scheduled amortization or mandatory redemption of principal (excluding customary offers to purchase under certain circumstances, such as a change in control) prior to the date that is 180 days after the Maturity Date, (D) does not require or permit payments in cash of interest or other amounts in the nature of interest prior to the date that is 180 days after the Maturity Date, (E) is subordinated to the Obligations on terms reasonably acceptable to the Administrative Agent, (F) is unsecured, (G) is not convertible into or exchangeable for any Indebtedness or Equity Interests other than Equity Interests in Holdings (other than Disqualified Equity Interests) on market terms, (H) has covenants, defaults and remedies provisions customary for senior discount notes of an issuer that is the parent of a borrower under senior credit facilities, and (I) the net proceeds from which are contributed by Holdings to the Borrower or any of the Restricted Subsidiaries for its general corporate purposes (including, without limitation, for the payment of the purchase price for acquisitions permitted under Section 7.03(h)).
Permitted Indebtedness has the meaning specified in Section 7.02.
Permitted Lien has the meaning specified in Section 7.01.
Permitted Protest means the protest by the Borrower or any Restricted Subsidiary of any Lien (other than any such Lien that secures the Obligations), taxes, or rental payment, provided that (a) a reserve with respect to such obligation is established on the books and records of the applicable Person in such amount (if any) to the extent required under GAAP, (b) any such protest is prosecuted diligently by the Borrower or such Restricted Subsidiary, as the case may be, in good faith, by appropriate proceedings, (c) such protest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, and (d) the failure to make payment during the pendency of such protest, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
Permitted Refinancing Indebtedness means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person (or any successor of such Person) by such Person or its successor; provided that (a) the principal or committed amount (or accreted value, if applicable) thereof does not exceed the sum of (i) the outstanding principal or committed amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended plus (ii) prepayment premiums and other reasonable amounts paid, and fees (including original issue discount and upfront fees) and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension, (b) other than with regard to Permitted Refinancing Indebtedness in respect of Indebtedness permitted pursuant to Section 7.03(f) or Section 7.03(h) such modification, refinancing, refunding, renewal or extension has (i) a final maturity date equal to or later than the final maturity date of the Indebtedness being modified, refinanced,
refunded, renewed or extended and (ii) a weighted average life to maturity equal to or greater than the weighted average life to maturity of the Indebtedness being modified, refinanced, refunded, renewed or extended, (c) if the Indebtedness being modified, refinanced, refunded, renewed or extended is Subordinated Indebtedness, such modification, refinancing, refunding, renewal or extension (i) is subordinated in right of payment to the Obligations on terms at least as favorable, taken as a whole, to the Lenders as those contained in the documentation governing the Subordinated Indebtedness being modified, refinanced, refunded, renewed or extended, (ii) does not require payments of cash interest prior to the date that is six months following the maturity date of the Indebtedness being refinanced in amounts greater than was required by the Indebtedness being refinanced, and (iii) contains covenants and events of default that are not more restrictive taken as a whole than the covenants and events of default contained in the documentation governing the Indebtedness being refinanced (as determined in good faith by the Borrower), and (d) no property of any Loan Party or Restricted Subsidiary shall constitute collateral security for the Indebtedness so modified, refinanced, refunded, renewed, or extended other than any Permitted Liens.
Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.
Plan means any employee benefit plan (as such term is defined in Section 3(3) of ERISA) established or maintained by Holdings, the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.
Platform has the meaning specified in Section 6.02.
Pledge Agreement means the Pledge Agreement dated April 6, 2012, among the Loan Parties and the Collateral Agent, together with each other pledge agreement and pledge agreement supplement delivered pursuant to Section 6.12(a)(iii), as amended.
Pledged Debt means any debt instrument constituting Collateral under any of the Collateral Documents.
Pledged Equity means any certificated equity security constituting Collateral under any of the Collateral Documents.
Prime Rate means the rate of interest per annum publicly announced from time to time by JPMorgan Chase Bank as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.
Pro Forma Basis means, with respect to compliance with any test or covenant or calculation hereunder, the determination or calculation of such test, covenant or ratio (including in connection with Specified Transactions) in accordance with Section 1.08.
Proposed Discounted Prepayment Amount has the meaning provided in Section 2.03(d)(ii).
Public Lender has the meaning specified in Section 6.02.
Public Market shall exist if (a) a Public Offering has been consummated and (b) any Equity Interests of Holdings have been distributed by means of an effective registration statement under the Securities Act.
Public Offering means a public offering of the Equity Interests of Holdings pursuant to an effective registration statement under the Securities Act.
Qualified ECP Guarantor means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an ECP under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an ECP at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Qualified Equity Interests means any Equity Interests that are not Disqualified Equity Interests.
Qualified Equity Issuance means any sale or issuance (other than to the Borrower or a Subsidiary) of any Qualified Equity Interests of the Borrower.
Qualifying Lenders has the meaning provided in Section 2.03(d)(iv).
Qualifying Loans has the meaning provided in Section 2.03(d)(iv).
Real Estate means all Leases and all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned by any Loan Party.
Refinanced Loans has the meaning provided in Section 11.01.
Refinancing Debt Securities means any Indebtedness consisting of one or more series of senior or junior unsecured notes or senior secured notes (debt securities) incurred or Guaranteed by Loan Parties following the Closing Date that are designated by the Borrower in a certificate of a Responsible Officer delivered to the Administrative Agent as Refinancing Debt Securities; provided that (i) such debt securities are pari passu or junior in right of payment with any remaining portion of the Facility and pari passu, junior or unsecured with respect to security with any remaining portion of the Facility, (ii) such debt securities do not mature prior to the maturity date of, or have a shorter weighted average life than, the Loans being refinanced, (iii) the other terms and conditions relating to such debt securities (excluding pricing and optional prepayment or redemption terms) are substantially identical to, or (taken as a whole as determined by the Borrower in its reasonable judgment) are no more favorable to the lenders providing such Refinancing Debt Securities than those applicable to the Loans being refinanced (except for covenants or other provisions applicable only to periods after the latest final maturity date of the Loans existing at the time of such refinancing) and (iv) the aggregate principal amount of any Refinancing Debt Securities does not exceed the aggregate amount of debt being refinanced therewith, plus interest, fees and expenses or to the extent otherwise permitted under this Agreement.
Refinancing Indebtedness means (i) any Refinancing Term Loans and (ii) any Refinancing Debt Securities.
Refinancing Term Loans means Incremental Term Loans that are designated by a Responsible Officer of the Borrower as Refinancing Term Loans in a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent on or prior to the date of incurrence; provided that (i) such Refinancing Term Loans do not mature prior to the maturity date of, or have a shorter weighted average life than, the Loans being refinanced, (ii) the other terms and conditions relating to such Refinancing Term Loans (excluding pricing and optional prepayment or redemption
terms) are substantially identical to, or (taken as a whole as determined by the Borrower in its reasonable judgment) are no more favorable to the lenders providing such Refinancing Term Loans than those applicable to the Loans being refinanced (except for covenants or other provisions applicable only to periods after the latest final maturity date of the Loans existing at the time of such refinancing) and (iii) the aggregate principal amount of any Refinancing Term Loans does not exceed the aggregate amount of debt being refinanced therewith, plus interest, fees and expenses or to the extent otherwise permitted under this Agreement.
Register has the meaning specified in Section 11.06(c).
Registered Public Accounting Firm has the meaning specified by the Securities Laws and shall be independent of Holdings and its Subsidiaries as prescribed by the Securities Laws.
Related Parties means, with respect to any Person, such Persons Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Persons Affiliates.
Release means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating of any Hazardous Material into or through the environment.
Replacement Loans has the meaning provided in Section 11.01.
Reportable Event means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived by regulation.
Repricing Transaction means the prepayment, refinancing, substitution or replacement of all or a portion of the Term B Loans with the incurrence by the Borrower or any Subsidiary of any debt financing having an effective interest cost or weighted average yield (with the comparative determinations to be made by the Administrative Agent consistent with generally accepted financial practices, after giving effect to, among other factors, margin, interest rate floors, upfront or similar fees or original issue discount shared with all providers of such financing, but excluding the effect of any arrangement, structuring, syndication or other fees payable in connection therewith that are not shared with all providers of such financing, and without taking into account any fluctuations in the LIBO Rate) that is less than the effective interest cost or weighted average yield (as determined by the Administrative Agent on the same basis) of such Term B Loans, including, without limitation, as may be effected through any amendment to this Agreement relating to the interest rate for, or weighted average yield of, such Term B Loans or the incurrence of any Refinancing Indebtedness.
Required Lenders means, as of any date of determination, Lenders holding in the aggregate more than 50% of the Total Outstandings; provided that the portion of the Total Outstandings held or deemed held by any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.
Responsible Officer means the chief executive officer, president, chief financial officer, any executive or senior vice president, treasurer, assistant treasurer or controller of a Loan Party or any of the other officers designated in writing to the Administrative Agent by an existing Responsible Officer of a Loan Party as an authorized signatory of any certificate or other document to be delivered hereunder. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or
other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
Restricted Payment means any dividend or other distribution (whether in cash, securities or other property) by Borrower or any of its Restricted Subsidiaries with respect to any Equity Interest of Holdings or any of its Restricted Subsidiaries, or any payment by Borrower or any of its Restricted Subsidiaries (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 Borrowers or any of its Restricted Subsidiaries direct or indirect stockholders, partners or members (or the equivalent of any thereof). For the avoidance of doubt, payments made pursuant to the Management Agreement shall not be considered Restricted Payments.
Restricted Subsidiary means any Subsidiary of Holdings other than an Unrestricted Subsidiary. In all events, the Borrower shall be deemed a Restricted Subsidiary of Holdings. A Restricted Subsidiary of Holdings that is also a Subsidiary of the Borrower shall also be deemed to be a Restricted Subsidiary of the Borrower.
Restriction has the meaning specified in Section 2.03(c).
S&P means Standard & Poors Ratings Services, a division of The McGrawHill Companies, Inc., and any successor thereto.
SEC means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
Second Priority means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is second in priority only to the Liens created under the ABL Loan Documents (subject to (i) in the case of Mortgages, Permitted Encumbrances) and (ii) otherwise, Permitted Liens).
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Securities Laws means the Securities Act, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 (in each case, as amended), and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.
Security Agreement means the Security Agreement dated April 6, 2012, among the Loan Parties and the Collateral Agent, together with each other security agreement and security agreement supplement delivered pursuant to Section 6.12(a)(iii), as amended.
Senior Secured Indebtedness means, as of any date of determination, the Total Debt (other than any portion of the Total Debt which is Subordinated Indebtedness) as of such date that is secured by a Lien on any asset of Holdings or any of its Restricted Subsidiaries.
Senior Secured Leverage Ratio means, as of any date of determination, the ratio of (a) the aggregate Senior Secured Indebtedness as of such date to (b) Consolidated EBITDA for the most recently completed Measurement Period plus, for the purposes of Section 7.15 only, any Specified Equity Contribution made with respect to such Measurement Period.
series means, with respect to any Extended Term Loans, Incremental Term Loans or Replacement Loans, all such Loans that have the same maturity date, amortization and interest rate provision and that are designated as part of such series pursuant to the applicable Additional Credit Extension Amendment.
Solvent and Solvency mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Persons ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Persons property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
Specified Equity Contribution means cash contributions in exchange for common equity of Holdings (or if preferred equity of Holdings, on terms and conditions reasonably acceptable to the Administrative Agent) or a cash capital contribution to Holdings, and in each case, promptly contributed to the Borrower by Holdings after the Closing Date and on or prior to the day that is ten days after the day on which financial statements are required to be delivered under Section 6.01(b) (without regard to any cure periods set forth in Section 8.01) for a month which is also a Fiscal Quarter end, which equity contribution shall be added to Consolidated EBITDA for the purposes of calculating compliance with the provisions of Section 7.15 in accordance with the definition of the term Senior Secured Leverage Ratio; provided that (a) in each four Fiscal Quarter period there shall be a period of at least two Fiscal Quarters in which no Specified Equity Contribution is made, (b) there shall be no more than four Specified Equity Contributions in the aggregate, (c) the amount of any Specified Equity Contribution shall be no greater than the amount required to cause the Borrower to be in compliance with the financial covenant set forth in Section 7.15, (d) to the extent that that amount of any Specified Equity Contribution is used to repay Indebtedness, such Indebtedness shall not be deemed to have been repaid for purposes of calculating the Senior Secured Leverage Ratio for the period with respect to which such Specified Equity Contribution is made, and (e) all Specified Equity Contributions shall be disregarded for all other purposes of this Agreement.Special Distribution means payments in an aggregate amount not to exceed $90,000,000 on or after the Amendment No. 1 Effective Date in respect of: (i) the payment by the Borrower to Holdings, the proceeds of which will be used to redeem a portion of the Equity Interests of Holdings and/or to pay cash dividends or distributions to the holders of the Equity Interests of Holdings and/or (ii) special bonuses, dividend equivalents or other payments payable to officers, employees, consultants and directors who hold options or similar Equity Interests in Holdings.
Specified Transaction means any Investment that results in a Person becoming a Restricted Subsidiary, any designation of a Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary, any Disposition that results in a Restricted Subsidiary ceasing to be a Subsidiary of the Borrower, any Investment constituting an acquisition of assets constituting a business unit, line of business or division of another Person or a Store or any Disposition of a business unit, line of business or division of the Borrower or a Restricted Subsidiary, in each case whether by merger, consolidation, amalgamation or otherwise, any incurrence or repayment of Indebtedness (other than Indebtedness incurred or repaid under any revolving credit facility in the ordinary course of business for working capital purposes), any Restricted Payment or Incremental Term Loan and any other transaction that by
the terms of this Agreement requires such test to be calculated on a Pro Forma Basis. Notwithstanding anything herein to the contrary, in no event shall the acquisition of TCS Installation Services, LLC be deemed to be a Specified Transaction.
Sponsor means Leonard Green & Partners, L.P.
Sponsor Affiliate means Sponsor or any Affiliate thereof (other than a portfolio company of Sponsor or a natural person).
Sponsor Affiliated Lender means any Lender (other than Holdings, the Borrower or any of their respective Subsidiaries) that is a Sponsor Affiliate or that is managed or advised by a Sponsor Affiliate.
Store means any retail store (which includes any real property, fixtures, equipment, inventory and other property related thereto) operated, or to be operated, by the Borrower or any Restricted Subsidiary.
Subordinated Indebtedness means all Indebtedness of a Loan Party that is subordinate in right of payment to any or all of the Obligations pursuant to subordination provisions reasonably acceptable to the Administrative Agent and which provide, without limitation, (a) for a maturity after the Maturity Date, (b) that such Indebtedness is unsecured, (c) that no principal payments shall be required to be made until after the Maturity Date, and (d) that interest shall accrue and be payable in cash at a market rate of interest, subject to the right of the Administrative Agent to impose a payment blockage period upon the occurrence and during the continuance of any Event of Default. In no event shall Disqualified Equity Interests be deemed Subordinated Indebtedness.
Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a Subsidiary or to Subsidiaries shall refer to a Subsidiary or Subsidiaries of Holdings.
Subsidiary Guarantors means collectively, all Restricted Subsidiaries of the Borrower other than (i) any CFC, (ii) any Subsidiary owned directly or indirectly by a CFC or (iii) any Domestic Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of the assets of such Domestic Subsidiary consist of Equity Interests in one or more Foreign Subsidiaries.
Survey means a survey of any Mortgaged Property (and all improvements thereon) which is (a) (i) prepared by a surveyor or engineer licensed to perform surveys in the jurisdiction where such Mortgaged Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof unless there shall have occurred within six months prior to such date of delivery any exterior construction on the site of such Mortgaged Property or any easement, right of way or other interest in the Mortgaged Property has been granted or become effective through operation of law or otherwise with respect to such Mortgaged Property which, in either case, can be depicted on a survey, in which events, as applicable, such survey shall be dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, or after the grant or effectiveness of any such easement, right of way or other interest in the Mortgaged Property, provided that with respect to any of the Mortgaged Properties described on Schedule 5.07(c) where no new construction has occurred since the most recent
survey and no new encumbrances have been created since the date of such survey, a survey affidavit of no change shall satisfy the provisions of this clause (ii), (iii) certified by the surveyor (in a manner reasonably acceptable to the Administrative Agent) to the Administrative Agent, the Collateral Agent and the Title Company, (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey, and (v) sufficient for the Title Company to remove all standard survey exceptions from the title insurance policy (or commitment) relating to such Mortgaged Property and issue the endorsements of the type required by Section 6.12, or (b) otherwise acceptable to the Collateral Agent.
Swap Contract means any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement.
Swap Obligation means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a swap within the meaning of section 1a(47) of the Commodity Exchange Act.
Swap Termination Value means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
Swedish Credit Facility means the Revolving Credit and Term Loan Facility Agreement, dated April 27, 2009, between Elfa International AB and Swedbank AB, including any related notes, guarantees and collateral documents executed in connection therewith, and in each case as amended, restated, modified, refinanced, renewed, refunded, restructured or replaced in any manner.
Swedish Pledge Agreement means the Share Pledge Agreement, dated April 6, 2012, between the Borrower as pledgor and the Collateral Agent.
Synthetic Debt means, with respect to any Person as of any date of determination thereof, all obligations of such Person in respect of transactions entered into by such Person that are intended to function primarily as a borrowing of funds (including any minority interest transactions that function primarily as a borrowing) but are not otherwise included in the definition of Indebtedness or as a liability on the Consolidated balance sheet of such Person and the Restricted Subsidiaries in accordance with GAAP.
Synthetic Lease Obligation means the monetary obligation of a Person under an agreement for the use or possession of property (including sale and leaseback transactions), in each case, creating obligations that do not appear on the balance sheet of such Person but which, upon the application of any Debtor Relief Laws to such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
Taxes means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Term B Loans means the Loans made on the Closing Date pursuant to Section 2.01(a) (has the meaning specified in Section 2.01(a). Immediately after giving effect to Amendment No. 1, the aggregate amount of outstanding Term B Loans on the Amendment No. 1 Effective Date is $362,250,000.
Term Loans means Initial Loans, Term B Loans and any Incremental Term Loans that are specified in the applicable Additional Credit Extension Amendment to be an increase in the amount of Term Loans).
Term Priority Collateral has the meaning specified in the Intercreditor Agreement.
Title Company means any title insurance company as shall be retained by the Borrower and reasonably acceptable to the Collateral Agent.
Total Debt means, at any date of determination (i) the aggregate principal amount of Indebtedness (other than contingent Indebtedness of the type described in clause (b) of the definition of Indebtedness and obligations under Swap Contracts permitted by Section 7.02(a)(except to the extent any such Swap Contract has terminated)) of Holdings and its Restricted Subsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a Consolidated basis in accordance with GAAP less (ii) the aggregate amount of unrestricted cash and Cash Equivalents of Holdings and its Restricted Subsidiaries on such date in excess of $5.0 million.
Total Outstandings means, on any date, the aggregate outstanding amount of all Loans, after giving effect to any borrowings or repayments of Loans occurring on such date.
Transaction means, collectively, (a) the execution of the ABL Facility and the lending of Loans thereunder, (b) the entering into the Loan Documents by the Loan Parties and their applicable Subsidiaries, (c) the termination and repayment of all Indebtedness under the Borrowers (i) Existing ABL Facility, (ii) Existing Mezzanine Notes and (iii) Existing Term Loan Facility and (d) the payment of the fees and Transaction Expenses.
Transaction Expenses means fees and expenses incurred in connection with the closing of this Agreement, the ABL Facility and the use of proceeds thereof.
Type means, with respect to a Loan, its character as a Base Rate Loan or a LIBO Rate Loan.
UCC means the Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral or the availability of any remedy under the Loan Documents is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, UCC means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection, priority or availability of such remedy.
Unfunded Pension Liability means the excess of a Pension Plans benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plans assets, determined in
accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
United States and U.S. mean the United States of America.
Unrestricted Subsidiary means (i) each Subsidiary of Holdings listed on Schedule 5.11 and designated as an Unrestricted Subsidiary, (ii) any Subsidiary of Holdings designated by the board of directors of Holdings as an Unrestricted Subsidiary pursuant to Section 6.17 subsequent to the date hereof, and (iii) any Subsidiary of an Unrestricted Subsidiary.
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.
U.S. Loan Party means any Loan Party that is organized under the laws of one of the states of the United States of America and that is not a CFC.
U.S. Tax Compliance Certificate has the meaning specified in Section 3.01(e)(iii).
Yield for any Indebtedness on any date of determination will be the internal rate of return on any Loan determined by the Administrative Agent utilizing (a) the greater of (i) if applicable, any LIBOR floor applicable to such Loan on such date and (ii) the forward LIBOR curve (calculated on a quarterly basis) as calculated by the Administrative Agent in accordance with its customary practice during the period from such date to the final maturity date of such Indebtedness; (b) the Applicable Margin for such Loan on such date; and (c) the issue price of such Loan (after giving effect to any original issue discount or upfront fees paid to the market in respect of such Indebtedness (converted to interest margin based on an assumed four year weighted average life) but excluding customary arranger, underwriting, structuring, syndication or other fees not paid to the lenders providing such Indebtedness generally).
1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. Unless the context requires otherwise, (i) any definition of or reference to any Law, agreement, instrument or other document (including any Organization Document) shall be construed as referring to such Law, agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Persons successors and assigns, (iii) the words herein, hereof and hereunder, and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Preliminary Statements, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Preliminary Statements, Exhibits and Schedules to the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any
law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words asset and property shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Knowledge shall mean the actual knowledge of a Responsible Officer of the Borrower after reasonable investigation.
(i) 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.
(ii) 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.
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 applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.
1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
1.05 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to New York City time (daylight or standard, as applicable).
1.06 Senior Debt. The Loans and other Obligations are hereby designated as Senior Debt and Designated Senior Debt (or other similar terms) for all purposes of any Subordinated Indebtedness.
1.07 Available Amount Transactions. 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.
1.08 Pro Forma Calculations.
(a) Notwithstanding anything to the contrary herein, the Senior Secured Leverage Ratio and the Consolidated Leverage Ratio shall be calculated in the manner prescribed by this Section 1.08; provided that, notwithstanding anything to the contrary in clauses (b), (c) or (d) of this Section 1.08, when calculating the Senior SecuredConsolidated Leverage Ratio for purposes of Section 2.03(b)(i), the events described in this Section 1.08 that occurred subsequent to the end of the applicable Measurement Period shall not be given pro forma effect.
(b) For purposes of calculating the Senior Secured Leverage Ratio and the Consolidated Leverage Ratio, Specified Transactions (and the incurrence or repayment of any Indebtedness in connection therewith) that have been made (i) during the applicable Measurement Period or (ii) subsequent to such Measurement 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 Consolidated EBITDA and the component financial definitions used therein attributable to any Specified Transaction) had occurred on the first day of the applicable Measurement Period. If since the beginning of any applicable Measurement Period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any of its Restricted Subsidiaries since the beginning of such Measurement Period shall have made any Specified Transaction that would have required adjustment pursuant to this Section 1.08, then the Senior Secured Leverage Ratio and the Consolidated Leverage Ratio shall be calculated to give pro forma effect thereto in accordance with this Section 1.08.
(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 responsible financial or accounting officer of the Borrower and may include, for the avoidance of doubt, the amount of cost savings and synergies projected by the Borrower in good faith to be realized as a result of specified actions taken, committed to be taken or expected to be taken (calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of such period and as if such cost savings and synergies were realized during the entirety of such period) relating to such Specified Transaction, net of the amount of actual benefits theretofore realized during such period from such actions; provided that (A) such amounts are reasonably identifiable, quantifiable and supportable in the good faith judgment of the Borrower, (B) such actions are taken, committed to be taken or expected to be taken no later than twelve (12) months after the date of such Specified Transaction, (C) no amounts shall be added pursuant to this clause (c) to the extent duplicative of any amounts that are otherwise added back in computing Consolidated EBITDA, whether through a pro forma adjustment or otherwise, with respect to such period and (D) the aggregate amount of cost savings and synergies added pursuant to this clause (c) for any such period after the Closing Date shall not exceed 10% of Consolidated EBITDA for such Measurement Period (giving pro forma effect to the relevant Specified Transaction (but not to any cost savings or synergies)).
(d) In the event that the Borrower or any Restricted Subsidiary incurs (including by assumption or guarantees) or repays (including by redemption, repayment, retirement or extinguishment) any Indebtedness included in the calculations of the Senior Secured Leverage Ratio and the Consolidated Leverage Ratio, as the case may be (in each case, other than Indebtedness incurred or repaid under any revolving credit facility in the ordinary course of business for working capital purposes), (i) during the applicable Measurement Period or (ii) subsequent to the end of the applicable Measurement Period and prior to or simultaneously with the event for which the calculation of any such ratio is made, then the Senior Secured Leverage Ratio and the Consolidated Leverage Ratio shall be calculated giving pro forma effect to such incurrence or repayment of Indebtedness, to the extent required, as if the same had occurred on the last day of the applicable Measurement Period.
ARTICLE II
THE COMMITMENTS AND BORROWINGS
2.01 The Loans.
(a) Subject to the terms and conditions set forth herein, each(i) the Additional Term B Lender severally agrees to make a loan to the Borrower on the Closing Date in Dollars in an amount notto the Borrower a loan denominated in Dollars (together with each Loan converted from a Converted Initial Loan pursuant to clause (ii) below, a Term B Loan) on the Amendment No. 1 Effective Date
equal to the Additional Term B Commitment and (ii) each Converted Initial Loan of each Amendment No. 1 Consenting Lender shall be converted into a Term B Loan of such Lender effective as of the Amendment No. 1 Effective Date in a principal amount equal to exceed such Lenders Commitment on the Closing Date. The Borrowingthe principal amount of such Lenders Converted Initial Loan immediately prior to such conversion; provided that the Term B Loans shall initially consist of Term Loans made simultaneously by such Lenders in accordance with their respective Commitments.LIBO Rate Loans with an Interest Period commencing on the Amendment No. 1 Effective Date and ending on June 28, 2013 and the LIBO Rate for such Interest Period shall be deemed to be 1.25%.
(b) Each Lender having an Incremental Term Loan Commitment severally agrees, subject to the terms and conditions and relying upon the representations and warranties set forth herein and in the applicable Additional Credit Extension Amendment, to make Incremental Term Loans to the Borrower, in an aggregate principal amount not to exceed its Incremental Term Loan Commitment. Each Incremental Term Borrowing shall consist of Incremental Term Loans made simultaneously by the applicable Incremental Term Lenders in accordance with their respective Incremental Term Loan Commitments.
(c) Amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed. Loans may be Base Rate Loans or LIBO Rate Loans as further provided herein. The failure of any Lender to make any Loan shall neither relieve any other Lender of its obligation to fund its Loan in accordance with the provisions of this Agreement nor increase the obligation of any such other Lender.
2.02 Borrowings, Conversions and Continuations of Loans.
(a) Each Borrowing, each conversion of Loans from one Type to the other, and each continuation of LIBO Rate Loans shall be made upon the Borrowers irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 2:00 p.m. (i) three Business Days prior to the requested date of the Borrowing of, conversion to or continuation of LIBO Rate Loans or of any conversion of LIBO Rate Loans to Base Rate Loans and (ii) one Business Day prior to the requested date of the Borrowing of Base Rate Loans (except that the notice of the Borrowing of Term B Loans on the Amendment No. 1 Effective Date may be provided on such shorter notice as may be agreed by the Administrative Agent). 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 or Conversion/Continuation Notice, as the case may be, appropriately completed and signed by a Responsible Officer of the Borrower. The Borrowing of, conversion to or continuation of LIBO Rate Loans (other than Term B Loans on the Amendment No. 1 Effective Date) shall be in a principal amount of $2.0 million or a whole multiple of $1.0 million in excess thereof. The Borrowing of or conversion to Base Rate (other than Term B Loans on the Amendment No. 1 Effective Date) Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (i) the requested date of the Borrowing (which shall be a Business Day), (ii) the principal amount of Loans to be borrowed, (iii) the Class of Loans to which such notice relates, (iv) the Type of Loans to be borrowed, and (v) if applicable, the duration of the Interest Period with respect thereto. Each Conversion/Notice (whether telephonic or written) shall specify the Class of Loans to which such notice relates and (i) whether the Borrower is requesting a conversion of Committed Loans from one Type to the other, or a continuation of LIBO Rate Loans, (ii) the requested date of the conversion or continuation (which shall be a Business Day), (iii) the principal amount of Loans to be converted or continued, (iv) if applicable, the Type of Loans to which existing Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice of a conversion or continuation in a Conversion/Notice, then the Loans shall be made as, or converted to,
Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable LIBO Rate Loans. If the Borrower requests a Borrowing of LIBO Rate Loans in any such Committed Loan Notice or a conversion to or continuation of LIBO Rate Loans in a Conversion/Continuation Notice, but fails to specify an Interest Period, the Borrower will be deemed to have specified an Interest Period of one month. For the avoidance of doubt, the notice of Borrowing of the Term B Loans on the Amendment No. 1 Effective Date is only required with respect to the Term B Loans of the Additional Term B Lender (it being understood that such notice of Borrowing shall specify the conversion of Initial Loans of Amendment No. 1 Consenting Lenders pursuant to Section 2.01(a)).
(b) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each applicable Lender of the amount of its share of such Loan (based on the respective Commitments of the Lenders of the applicable Class) with respect to the Loans referred to in such Committed Loan Notice, and if no timely notice of a conversion or continuation in a Conversion/Continuation Notice is provided by the Borrower, the Administrative Agent shall notify each such Lender of the details of any automatic conversion to Base Rate Loans described in Section 2.02(a). Each applicable Lender shall make the amount of its Loan available to the Administrative Agent in immediately available funds at the Administrative Agents Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the conditions set forth in Section 4.01 (or, if such Borrowing is an Incremental Term Borrowing, the conditions set forth in the applicable Additional Credit Extension Amendment and Section 2.12), the Administrative Agent shall use reasonable efforts to make all funds so received available to the Borrower in like funds by no later than 4:00 p.m. on the day of receipt by the Administrative Agent either by (i) crediting the account of the Borrower on the books of JPMCB with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower.
(c) Except as otherwise provided herein, a LIBO Rate Loan may be continued or converted only on the last day of an Interest Period for such LIBO Rate Loan. During the existence of an Event of Default, no Loans may be requested as, converted to or continued as LIBO Rate Loans without the consent of the Required Lenders.
(d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for LIBO Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in JPMorgans prime rate used in determining the Base Rate promptly following the public announcement of such change.
(e) After giving effect to all Borrowings, all conversions of Loans from one Type to the other, and all continuations of Loans as the same Type, there shall not be more than ten (10) Interest Periods in effect with respect to all Loans.
2.03 Prepayment.
(a) Optional. The Borrower may, upon notice to the Administrative Agent (which notice, if furnished in connection with a refinancing of the Obligations, may be conditional upon the consummation of such refinancing), at any time or from time to time voluntarily prepay Loans of any Class in whole or in part without premium or penalty (except as provided in Section 2.14); provided, however, that no prepayments of any Extended Term Loans of any series shall be permitted pursuant to this Section 2.03(a) so long as any Loans of any Existing Term Loan Class from which such Extended Term Loans were converted remain outstanding unless such prepayment is accompanied by a pro rata (or
greater proportionate) prepayment of Loans of such Existing Term Loan Class; provided, further, that (i) such notice must be received by the Administrative Agent not later than 2:00 p.m. (A) one Business Day prior to any date of prepayment of LIBO Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of LIBO Rate Loans shall be in a principal amount of $2.0 million or a whole multiple of $1.0 million in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment, the Class and Type(s) of Loans to be prepaid and, if LIBO Rate Loans are to be prepaid, the Interest Period(s) of such Loans. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lenders share of such prepayment (which shall be based on the respective principal amounts of Loans of the applicable Class held by each Lender). If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein except that, subject to Section 3.05, any such notice in connection with a refinancing of all Loans may be conditioned upon obtaining the proceeds of a new financing. Any prepayment of a LIBO Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Optional prepayments of the Loans of any Class shall be applied against the remaining scheduled installments of principal due in respect of the Loans of such Class as directed by the Borrower (or, if the Borrower shall fail to provide such direction, in direct order of maturity against the remaining scheduled installments due in respect of the Loans and Other Term Loans under Section 2.05).
(b) Mandatory.
(i) Within five Business Days after financial statements have been (or were required to have been) delivered pursuant to Section 6.01(a) and the related Compliance Certificate has been (or is required to have been) delivered pursuant to Section 6.02(a), the Borrower shall prepay an aggregate principal amount of Loans equal to the excess (if any) of (A) 50% of Excess Cash Flow for the Fiscal Year of Borrower (commencing with the Fiscal Year ending February 23, 2013) covered by (or which would have been covered by) such financial statements over (B) the aggregate principal amount of Loans prepaid pursuant to Section 2.03(a) during the Fiscal Year of Holdings covered by (or which would have been covered by) such financial statements, except to the extent such prepayments occurred in connection with a refinancing of such Loans with other Indebtedness (such prepayments to be applied as set forth in clause (v) below); provided that (x) such percentage of Excess Cash Flow shall be reduced to 25% of such Excess Cash Flow if the Consolidated Leverage Ratio at the end of such Fiscal Year is equal to or less than 3.00 to 1.00 but greater than 2.00 to 1.00 and (y) such prepayment shall not be required if the Consolidated Leverage Ratio at the end of such Fiscal Year is equal to or less than 2.00 to 1.00.
(ii) If the Borrower or any of its Restricted Subsidiaries Disposes of any property (other than any Disposition of any property permitted by Section 7.05(a), (b), (c), (d), (e), (g), (i) or (j)) which results in the realization by such Person of Net Cash Proceeds, the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of such Net Cash Proceeds promptly (and in any event within ten Business Days) following receipt thereof by such Person (such prepayments to be applied as set forth in clause (v) below); provided, however, that so long as no Event of Default shall have occurred and be continuing, the Borrower or any other Restricted Subsidiary may reinvest all or any portion of such Net Cash Proceeds in assets that the Borrower determines in good faith are used or useful in the business of the Borrower or the Restricted Subsidiaries (including acquisitions permitted under Section 7.03(h) and inventory) so long as (A) within ten Business Days of receiving such Net Cash Proceeds the Borrower shall have delivered a certificate to the Administrative Agent stating that such Person intends to reinvest all or any portion of such Net Cash Proceeds in such assets, (B) within 365 days after the receipt of such Net Cash Proceeds, the Borrower shall have entered into a binding
commitment to reinvest such proceeds in such assets, and (C) such Net Cash Proceeds are reinvested in such assets within 180 days of the date such commitment is entered into (as certified by the Borrower in writing to the Administrative Agent); provided, further, however, that (A) if the property subject to such Disposition constituted Collateral under the Collateral Documents, then all property purchased with the Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Collateral Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Credit Parties in accordance with Section 6.12, and (B) pending reinvestment, any Net Cash Proceeds in respect of Term Priority Collateral in excess of $5.0 million shall be segregated from other funds of the Borrower and its Subsidiaries in a deposit account subject to a control agreement in favor of the Collateral Agent; and provided, further, however, that any Net Cash Proceeds not so reinvested within the time periods specified above shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.03(b)(ii).
(iii) Upon the incurrence or issuance by Borrower or any of its Restricted Subsidiaries of any Refinancing Indebtedness or any Indebtedness not permitted to be incurred or issued pursuant to Section 7.02, the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom promptly (and in any event within one week) following receipt thereof by such Person (such prepayments to be applied as set forth in clause (v) below).
(iv) Upon any Extraordinary Receipt being received by or paid to or for the account of Borrower or any of its Restricted Subsidiaries, and not otherwise included in clause (ii) of this Section 2.03(b), the Borrower shall prepay an aggregate principal amount of Loans equal to 100% of all Net Cash Proceeds received therefrom promptly (and in any event within ten Business Days) following receipt thereof by such Person (such prepayments to be applied as set forth in clause (v) below); provided, however, that with respect to any proceeds of insurance and condemnation awards (or payments in lieu thereof), and so long as no Event of Default shall have occurred and be continuing, such Person may apply such Net Cash Proceeds to replace or repair the equipment, fixed assets or real property in respect of which such Net Cash Proceeds were received or to invest in assets that the Borrower determines in good faith are used or useful in the business of the Borrower or the Restricted Subsidiaries (including acquisitions permitted under Section 7.03(h) and inventory) so long as (A) within ten Business Days of receiving such Net Cash Proceeds the Borrower shall have delivered a certificate to the Administrative Agent stating that such Person intends to reinvest all or such portion of such Net Cash Proceeds to replace or repair the equipment, fixed assets or real property in respect of which such cash proceeds were received or to invest in such assets, (B) within 365 days after the receipt of such Net Cash Proceeds, the Borrower shall have entered into a binding commitment to reinvest such proceeds to replace or repair equipment, fixed assets or real property or to invest in such assets, and (C) such Net Cash Proceeds are so used within 180 days of the date such commitment is entered into (as certified by the Borrower in writing to the Administrative Agent); provided, further, however, that (A) if the property subject to such Extraordinary Receipt constituted Collateral under the Collateral Documents, then all property purchased with the Net Cash Proceeds thereof pursuant to this subsection shall be made subject to the Lien of the applicable Collateral Documents in favor of the Collateral Agent, for its benefit and for the benefit of the other Credit Parties in accordance with Section 6.12 and (B) pending reinvestment, any Net Cash Proceeds in respect of Term Priority Collateral in excess of $5.0 million shall be segregated from the other funds of Holdings and its Subsidiaries in a deposit account subject to a control agreement in favor of the Collateral Agent; provided, further, however, that any cash proceeds not so applied shall be immediately applied to the prepayment of the Loans as set forth in this Section 2.03(b)(iv).
(v) Each prepayment of Loans pursuant to the foregoing provisions of this Section 2.03(b) shall be allocated ratably between the Term Loans and, unless otherwise provided in the Additional Credit Extension Amendment providing for such other Class of Loans, each other Class of
Loans and shall be applied to the remaining scheduled principal payments thereof in direct order of maturity (or as otherwise specified by the Borrower). Any Lender may elect, by notice to the Administrative Agent at or prior to the time and in the manner specified by the Administrative Agent, prior to any prepayment of Loans to be made pursuant to clause (i), (ii) or (iv) of this Section 2.03(b), to decline all (but not a portion) of its pro rata share of such prepayment (such declined amounts Declined Proceeds). Any Declined Proceeds shall be offered to the Lenders of the applicable Class or Classes not so declining such prepayment (with such Lenders having the right to decline any prepayment with Declined Proceeds at the time and in the manner specified by the Administrative Agent).
Notwithstanding any of the other provisions of clauses (i), (ii), or (iv) of this Section 2.03(b), so long as no Default under Section 8.01(a) or Section 8.01(f) or Event of Default shall have occurred and be continuing, if, on any date on which a prepayment would otherwise be required to be made pursuant to clauses (i), (ii), or (iv) of this Section 2.03(b), the aggregate amount of Net Cash Proceeds required by such clause to be applied to prepay Loans on such date is less than or equal to $5.0 million, the Borrower may defer such prepayment until the first date on which the aggregate amount of Net Cash Proceeds or other amounts otherwise required under clause (i), (ii), or (iv) of this Section 2.03(b) to be applied to prepay Loans exceeds $5.0 million. Upon the occurrence of a Default under Section 8.01(a) or Section 8.01(f) or an Event of Default during any such deferral period, the Borrower shall immediately prepay the Loans in the amount of all Net Cash Proceeds received by the Borrower and other amounts, as applicable, that are required to be applied to prepay Loans under this Section 2.03(b) (without giving effect to the first sentence of this clause (v)) but which have not previously been so applied. Any prepayment of a LIBO Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amount required pursuant to Section 3.05.
(vi) The Borrower shall deliver to the Administrative Agent, (x) at the time of each prepayment required under this Section 2.03(b), a certificate signed by a Responsible Officer of the Borrower setting forth in reasonable detail the calculation of the amount of such prepayment and (y) to the extent practicable, at least three days prior written notice of such prepayment. Each notice of prepayment shall specify the prepayment date, the Type of each Loan being prepaid and the principal amount of each Loan (or portion thereof) to be prepaid.
(c) The prepayments of the Loans pursuant to Section 2.03(b)(i), (ii) or (iv), to the extent the Net Cash Proceeds giving rise to the requirement to make a prepayment pursuant to one of such clauses are generated by a Foreign Subsidiary, shall be subject to (x) permissibility under local law relating to financial assistance, corporate benefit, restrictions on upstreaming of cash intra-group and the fiduciary and statutory duties of the directors of such Foreign Subsidiary and (y) restrictions in its material organizational documents and in agreements governing Indebtedness of such Foreign Subsidiary (including as a result of minority ownership) (each restriction referred to in clauses (i) and (ii), a Restriction). Further, there will be no requirement to make any such prepayment where a Responsible Officer of the Borrower delivers a certificate to the Administrative Agent stating that it would incur a material tax liability by doing so, including a material deemed dividend pursuant to Section 956 of the Internal Revenue Code. The non-application and nonpayment of any prepayment amounts pursuant to Sections 2.03(b)(i), (ii) or (iv) as a consequence of this Section 2.03(c) will not, for the avoidance of doubt, constitute a Default or an Event of Default, and such prepayment amounts shall be available for working capital purposes of Borrower and its Restricted Subsidiaries as long as not required to be prepaid in accordance with the following provisions. Borrower and its Restricted Subsidiaries will use and shall procure that any of their Subsidiaries will use commercially reasonable efforts to overcome or eliminate any Restrictions and/or minimize any such costs of prepayment and/or use the other cash resources of Borrower and its Subsidiaries (subject to the considerations above) to make the relevant prepayment. If at any time within one year of a prepayment being forgiven due to a Restriction, such Restriction is removed, any relevant proceeds will at the end of the then current Interest Period (or, if
Base Rate Loans are then outstanding, immediately) be applied in accordance with the applicable prepayment provision above (net of any reasonable costs, expenses or taxes incurred by Borrower and its Restricted Subsidiaries and arising exclusively as a result of compliance with the preceding sentence).
(d) Discounted Voluntary Prepayments.
(i) Notwithstanding anything to the contrary in Section 2.03(a) (which provisions shall not be applicable to this Section 2.03(d)), the Borrower shall have the right at any time and from time to time to prepay its Loans of any Class owing to Lenders electing to participate in such prepayments at a discount to the par value of such Loans and on a non-pro rata basis (each, a Discounted Voluntary Prepayment) pursuant to the procedures described in this Section 2.03(d); provided that (A) no Discounted Voluntary Prepayment shall be made unless immediately after giving effect to such Discounted Voluntary Prepayment, no Default or Event of Default has occurred and is continuing, (B) any Discounted Voluntary Prepayment shall be offered to all Lenders with Loans of the applicable Class on a pro rata basis and (C) the Borrower on the date such Discounted Voluntary Prepayment is made shall deliver to the Administrative Agent a certificate of a Responsible Officer of the Borrower stating (1) that no Default or Event of Default has occurred and is continuing or would result from the Discounted Voluntary Prepayment, (2) that each of the conditions to such Discounted Voluntary Prepayment contained in this Section 2.03(d) has been satisfied or waived and (3) neither the Borrower nor any of its Affiliates has any non-public information with respect to any Loan Party or the Loans that has not been disclosed to the Lenders (other than to Public Lenders) that would reasonably be expected to be material to a Lenders decision to participate in a Discounted Voluntary Prepayment.
(ii) To the extent the Borrower seeks to make a Discounted Voluntary Prepayment, the Borrower will provide written notice to the Administrative Agent substantially in the form of Exhibit B hereto (each, a Discounted Prepayment Option Notice) that the Borrower desires to prepay Loans in an aggregate principal amount specified therein by the Borrower (each, a Proposed Discounted Prepayment Amount), in each case at a discount to the par value of such Loans as specified below. The Proposed Discounted Prepayment Amount of Loans shall not be less than $10.0 million. The Discounted Prepayment Option Notice shall further specify with respect to the proposed Discounted Voluntary Prepayment: (A) the Proposed Discounted Prepayment Amount for Loans and the Class of Loans to which such offer relates, (B) a discount range (which may be a single percentage) selected by the Borrower with respect to such proposed Discounted Voluntary Prepayment equal to a percentage of par of the principal amount of such Loans (the Discount Range) and (C) the date by which Lenders are required to indicate their election to participate in such proposed Discounted Voluntary Prepayment which shall be at least three Business Days following the date of the Discounted Prepayment Option Notice (the Acceptance Date).
(iii) Upon receipt of a Discounted Prepayment Option Notice in accordance with Section 2.03(d)(ii), the Administrative Agent shall promptly notify each applicable Lender thereof. On or prior to the Acceptance Date, each Lender with Loans may specify by written notice substantially in the form of Exhibit G hereto (each, a Lender Participation Notice) to the Administrative Agent (A) a maximum discount to par (the Acceptable Discount) within the Discount Range (for example, a Lender specifying a discount to par of 20% would accept a prepayment price of 80% of the par value of the Loans to be prepaid) and (B) a maximum principal amount (subject to rounding requirements specified by the Administrative Agent) of Loans of the applicable Class held by such Lender with respect to which such Lender is willing to permit a Discounted Voluntary Prepayment at the Acceptable Discount (Offered Loans). Based on the Acceptable Discounts and principal amounts of Loans specified by the Lenders in Lender Participation Notices, the Administrative Agent, in consultation with the Borrower, shall calculate the applicable discount for Loans (the Applicable Discount), which Applicable Discount shall be (A) the percentage specified by the Borrower if the Borrower has selected a single percentage
pursuant to Section 2.03(d)(ii) for the Discounted Voluntary Prepayment or (B) otherwise, the highest Acceptable Discount at which the Borrower can pay the Proposed Discounted Prepayment Amount in full (determined by adding the principal amounts of Offered Loans commencing with the Offered Loans with the highest Acceptable Discount); provided, however, that in the event that such Proposed Discounted Prepayment Amount cannot be repaid in full at any Acceptable Discount, the Applicable Discount shall be the lowest Acceptable Discount specified by the Lenders that is within the Discount Range. The Applicable Discount shall be applicable for all Lenders who have offered to participate in the Discounted Voluntary Prepayment and have Qualifying Loans (as defined below). Any Lender with outstanding Loans under the applicable Class whose Lender Participation Notice is not received by the Administrative Agent by the Acceptance Date shall be deemed to have declined to accept a Discounted Voluntary Prepayment of any of its Loans at any discount to their par value within the Applicable Discount.
(iv) The Borrower shall make a Discounted Voluntary Prepayment by prepaying those Loans (or the respective portions thereof) of the applicable Class offered by the Lenders (Qualifying Lenders) that specify an Acceptable Discount that is equal to or greater than the Applicable Discount (Qualifying Loans) at the Applicable Discount; provided that if the aggregate proceeds required to prepay all Qualifying Loans (disregarding any interest payable at such time) would exceed the amount of aggregate proceeds required to prepay the Proposed Discounted Prepayment Amount, such amounts in each case calculated by applying the Applicable Discount, the Borrower shall prepay such Qualifying Loans ratably among the Qualifying Lenders based on their respective principal amounts of such Qualifying Loans (subject to rounding requirements specified by the Administrative Agent). If the aggregate proceeds required to prepay all Qualifying Loans (disregarding any interest payable at such time) would be less than the amount of aggregate proceeds required to prepay the Proposed Discounted Prepayment Amount, such amounts in each case calculated by applying the Applicable Discount, the Borrower shall prepay all Qualifying Loans.
(v) Each Discounted Voluntary Prepayment shall be made within five Business Days of the Acceptance Date, without premium or penalty, upon irrevocable notice substantially in the form of Exhibit I hereto (each a Discounted Voluntary Prepayment Notice), delivered to the Administrative Agent no later than 1:00 p.m. New York City time, two Business Days prior to the date of such Discounted Voluntary Prepayment, which notice shall specify the date and amount of the Discounted Voluntary Prepayment and the Applicable Discount determined by the Administrative Agent. Upon receipt of any Discounted Voluntary Prepayment Notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any Discounted Voluntary Prepayment Notice is given, the amount specified in such notice shall be due and payable to the applicable Lenders, subject to the Applicable Discount on the applicable Loans, on the date specified therein together with accrued interest (on the par principal amount) to, but not including, such date on the amount prepaid.
(vi) To the extent not expressly provided for herein, each Discounted Voluntary Prepayment shall be consummated pursuant to reasonable procedures (including as to timing, rounding, minimum amounts, Type and Interest Periods and calculation of Applicable Discount in accordance with Section 2.03(d)(iii) above) reasonably established by the Administrative Agent and the Borrower.
(vii) Prior to the delivery of a Discounted Voluntary Prepayment Notice, upon written notice to the Administrative Agent, the Borrower may withdraw its offer to make a Discounted Voluntary Prepayment pursuant to any Discounted Prepayment Option Notice.
(viii) To the extent the Loans are prepaid pursuant to this Section 2.03(d), scheduled amortization amounts for the Loans of such Class under Section 2.05 shall be reduced on a pro rata basis by the principal amount of the Loans so prepaid.
(ix) For the avoidance of doubt, any Loans that are prepaid pursuant to this Section 2.03(d) shall be deemed canceled immediately upon giving effect to such prepayment.
2.04 Termination or Reduction of Commitments. The Aggregate Commitments (other than the Additional Term B Commitment) shall be automatically and permanently reduced to zero on the date of the initial Borrowing (other than any Incremental Term Loan Commitments, which shall terminate as provided in the related Additional Credit Extension Amendment). The Additional Term B Commitment shall be automatically and permanently reduced to zero upon the making of the Additional Term B Lenders Additional Term B Loans pursuant to Section 2.01(a).
2.05 Repayment of Loans.
(a) (i) The Borrower shall repay to the Lenders the aggregate principal amount of all Loans (other than Other Term B Loans) outstanding on the following dates in the respective amounts set forth opposite such dates (as adjusted from time to time pursuant to Sections 2.03(a), 2.03(b)(v), 2.03(d)(viii) and 2.12):
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June 30, 2013 |
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$ |
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September 30, 2013 |
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$ |
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December 31, 2013 |
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$ |
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March 31, 2014 |
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$ |
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June 30, 2014 |
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$ |
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September 30, 2014 |
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$ |
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December 31, 2014 |
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$ |
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March 31, 2015 |
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$ |
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June 30, 2015 |
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$ |
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September 30, 2015 |
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$ |
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December 31, 2015 |
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$ |
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March 31, 2016 |
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$ |
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June 30, 2016 |
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$ |
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September 30, 2016 |
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$ |
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December 31, 2016 |
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$ |
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March 31, 2017 |
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$ |
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June 30, 2017 |
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$ |
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September 30, 2017 |
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$ |
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December 31, 2017 |
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$ |
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March 31, 2018 |
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$ |
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June 30, 2018 |
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$ |
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September 30, 2018 |
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$ |
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December 31, 2018 |
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$ |
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Maturity Date |
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$ |
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(b) The Borrower shall repay to the Administrative Agent for the ratable account of the Lenders with Initial Loans that are not Converted Initial Loans, all Initial Loans that are not Converted Initial Loans on the Amendment No. 1 Effective Date.
(c) (b) Payments or principal on Other Term Loans, Extended Term Loans and Replacement Loans shall be required as provided in the applicable Additional Credit Extension Amendment.
(d) (e) All repayments pursuant to this Section 2.05 shall (i) be subject to Section 3.05, but shall otherwise be without premium or penalty and (ii) be accompanied by accrued and unpaid interest on the principal amount to be paid.
2.06 Interest.
(a) Subject to the provisions of Section 2.06(b), (i) each Loan which is a LIBO Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the LIBO Rate for such Interest Period plus the Applicable Margin; and (ii) each Loan which is a Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin.
(b) If any amount owed under this Agreement is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. 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.
2.07 Fees. The Borrower shall pay to the Arrangers and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the letter agreements entered into by the Borrower, the Administrative Agent and the Arrangers. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.
2.08 Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by the Administrative Agents prime rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (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.
2.09 Evidence of Debt. The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by the Administrative Agent in the ordinary course of business. In addition, each Lender may record in such Lenders internal records an appropriate notation evidencing the date and amount of each Loan from such Lender, each payment and prepayment of principal of any such Loan, and each payment of interest, fees and other amounts due in connection with the Obligations due to such Lender. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive, absent manifest error, of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall
not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent 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 Note, which shall evidence such Lenders Loans (in addition to such Lenders accounts or records). Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto. Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lenders Note and upon cancellation of such Note, the Borrower will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor.
2.10 Payments Generally; Administrative Agents Clawback.
(a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agents Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its share of such payment in like funds as received by wire transfer to such Lenders Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. 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.
(b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of Loans that such Lender will not make available to the Administrative Agent such Lenders share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such 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.
(ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the time at which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.
(c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Borrowing set forth in Article IV or in the applicable Additional Credit Extension Amendment, as applicable, are not satisfied or waived in accordance with the terms hereof or thereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.
(d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Committed Loans and to make payments pursuant to Section 11.04(c) are several and not joint. The failure of any Lender to make any Committed Loan or to make any payment under Section 11.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan or to make its payment under Section 11.04(c).
(e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.
(f) Insufficient Funds. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, toward payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, toward payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.
2.11 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of (a) Obligations due and payable to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations due and payable to such Lender at such time to (ii) the aggregate amount of the Obligations due and payable to all Lenders hereunder and under the other Loan Documents at such time) of payments on account of the Obligations due and payable to all Lenders hereunder and under the other Loan Documents at such time obtained by all the Lenders at such time or (b) Obligations owing (but not due and payable) to such Lender hereunder and under the other Loan Documents at such time in excess of its ratable share (according to the proportion of (i) the amount of such Obligations owing (but not due and payable) to such Lender at such time to (ii)
the aggregate amount of the Obligations owing (but not due and payable) to all Lenders hereunder and under the other Loan Parties at such time) of payment on account of the Obligations owing (but not due and payable) to all Lenders hereunder and under the other Loan Documents at such time obtained by all of the Lenders at such time, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of Obligations then due and payable to the Lenders or owing (but not due and payable) to the Lenders, as the case may be, provided that:
(i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and
(ii) the provisions of this Section 2.11 shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant in accordance with this Agreement.
Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.
2.12 Incremental Term Loan Commitments.
(a) The Borrower may, by written notice to the Administrative Agent from time to time, request Incremental Term Loan Commitments in an amount (excluding any Incremental Term Loan Commitments in respect of Refinancing Term Loans) not to exceed the Incremental Term Loan Amount from one or more Incremental Term Lenders, which may include any existing Lender; provided that each Incremental Term Lender, if not already a Lender hereunder, shall be subject to the approval of the Administrative Agent to the extent such consent would be required for an assignment to such Lender pursuant to Section 11.06(b). Such notice shall set forth (i) the amount of the Incremental Term Loan Commitments being requested (which shall be in minimum increments of $1.0 million and a minimum amount of $5.0 million or such lesser amount equal to the remaining Incremental Term Loan Amount), (ii) the date on which such Incremental Term Loan Commitments are requested to become effective, and (iii) whether such Incremental Term Loan Commitments are commitments to make additional Term Loans or commitments to make term loans with terms different from the Loans (Other Term Loans).
(b) The Borrower and each Incremental Term Lender shall execute and deliver to the Administrative Agent an Additional Credit Extension Amendment and such other documentation as the Administrative Agent shall reasonably specify to evidence the Incremental Term Loan Commitment of each Incremental Term Lender. Each Additional Credit Extension Amendment pursuant to this Section 2.12 shall specify the terms of the Incremental Term Loans to be made thereunder; provided that, without the prior written consent of the Required Lenders, (i) the final maturity date of any Other Term Loans shall be no earlier than the Maturity Date, (ii) the weighted average life to maturity of the Other Term Loans shall be no shorter than the weighted average life to maturity of the then already outstanding Loans, (iii) any Incremental Term Loans shall rank (A) pari passu in right of payment to the Loans and (B) with respect to security, pari passu with the Term Loans and (iv) the provisions with respect to
payment of interest, original issue discount and upfront fees shall be as set forth in the applicable Additional Credit Extension Amendment; provided that if the Yield of any Incremental Term Loans (other than Refinancing Term Loans) exceeds the Yield of the Term Loans by more than 50 basis points, then the Applicable Margin for the Term Loans shall be increased to the extent required so that the Yield of the Term Loans is equal to the Yield of such Incremental Term Loans minus 50 basis points and (v) all other terms (other than the amortization schedule, which, subject to clauses (i) and (ii) above, shall be determined by Borrower and the Lenders thereunder) applicable to any Incremental Term Loans shall either be substantially identical to the terms applicable to the Term Loans or shall be reasonably satisfactory to the Administrative Agent. For the avoidance of doubt, no Lender shall have any obligation to provide any Incremental Term Loan. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Additional Credit Extension Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Additional Credit Extension Amendment pursuant to this Section 2.12, this Agreement and the other Loan Documents shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Term Loan Commitment and the Incremental Term Loans evidenced thereby.
(c) Notwithstanding the foregoing, no Incremental Term Loan Commitment shall become effective under this Section 2.12 unless (i) on the date of such effectiveness, the representations and warranties of the Borrower and each other Loan Party contained in this Agreement and the other Loan Documents shall be true in all material respects on such date except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, (ii) no Default or Event of Default shall have occurred or be continuing or would result therefrom, (iii) calculations shall have been made by the Borrower demonstrating that, on a Pro Forma Basis, the Borrower would be in compliance with the covenant contained in Section 7.15 as of the last day of the most recently ended Measurement Period,Consolidated Leverage Ratio (calculated to exclude the net cash proceeds from such Incremental Term Loan Commitment) for the Measurement Period most recently ended prior to the date of such effectiveness is no greater than 4.00 to 1.00, (iv) the Administrative Agent shall have received (with sufficient copies for each of the Incremental Term Lenders) an officers certificate executed by a Responsible Officer of the Borrower certifying as to compliance with preceding clauses (i) and (ii) and containing the calculations (in reasonable detail) required by preceding clause (iii), together with (unless otherwise specified in the applicable Additional Credit Extension Amendment) legal opinions, board resolutions and other closing certificates reasonably requested by the Administrative Agent and consistent with those delivered on the Closing Date under Section 4.01, (v) all fees and expenses owing to the Administrative Agent or the Incremental Term Lenders in connection with such Incremental Term Loan Commitment shall have been paid, (vi) the Additional Credit Extension Amendment and any other documents entered into in connection therewith shall be reasonably satisfactory to the Administrative Agent.
(d) Each of the parties hereto hereby agrees that the Administrative Agent may, in consultation with the Borrower, take any and all action as may be reasonably necessary to ensure that all Incremental Term Loans (other than Other Term Loans), when originally made, are included in each Borrowing of outstanding Loans on a pro rata basis. This may be accomplished by requiring each outstanding LIBO Rate Borrowing to be converted into a Base Rate Borrowing on the date of each Incremental Term Loan, or by allocating a portion of each Incremental Term Loan to each outstanding LIBO Rate Loan on a pro rata basis. Any conversion of LIBO Rate Loans to Base Rate Loans required by the preceding sentence shall be subject to Section 3.05. If any Incremental Term Loan is to be allocated to an existing Interest Period for a LIBO Rate Borrowing, then the interest rate thereon for such Interest Period and the other economic consequences thereof shall be as set forth in the applicable Additional Credit Extension Amendment. In addition, to the extent any Incremental Term Loans are not Other Term Loans, the scheduled amortization payments under Section 2.05(a)(i) required to be made
after the making of such Incremental Term Loans shall be ratably increased by the aggregate principal amount of such Incremental Term Loans.
2.13 Extended Term Loans.
(a) The Borrower may at any time and from time to time request that all or a portion of the Loans of any Class in an aggregate principal amount of not less than $50.0 million (or, if less, all remaining Term Loans of such Class) (an Existing Term Loan Class) be converted 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 Loans (any such Loans which have been so converted, Extended Term Loans) and to provide for other terms consistent with this Section 2.13. In order to establish any Extended Term Loans, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders under the Existing Term Loan Class) (an Extension Request) setting forth the proposed terms of the Extended Term Loans to be established, which shall be consistent with the Loans under the Existing Term Loan Class from which such Extended Term Loans are to be converted except that:
(i) all or any of the scheduled amortization payments of principal of the Extended Term Loans may be delayed to later dates than the scheduled amortization payments of principal of the Loans of such Existing Term Loan Class to the extent provided in the applicable Additional Credit Extension Amendment;
(ii) the interest margins with respect to the Extended Term Loans may be different than the Applicable Margin for the Loans of such Existing Term Loan Class and upfront fees may be paid to the Extending Term Lenders to the extent provided in the applicable Additional Credit Extension Amendment; and
(iii) the Additional Credit Extension Amendment may provide for other covenants and terms that apply only after the final maturity date of all then outstanding Loans.
(b) Any Extended Term Loans converted pursuant to any Extension Request shall be designated a series of Extended Term Loans for all purposes of this Agreement; provided that, subject to the limitations set forth in clause (a) above, any Extended Term Loans converted from an Existing Term Loan Class may, to the extent provided in the applicable Additional Credit Extension Amendment and consistent with the requirements set forth above, be designated as an increase in any previously established Class of Loans.
(c) The Borrower shall provide the applicable Extension Request at least five (5) Business Days prior to the date on which Lenders under the applicable Existing Term Loan Class are requested to respond. No Lender shall have any obligation to agree to have any of its Loans of any Existing Term Loan Class converted into Extended Term Loans pursuant to any Extension Request. Any Lender wishing to have all or a portion of its Loans under the Existing Term Loan Class subject to such Extension Request (such Lender an Extending Term Lender) converted into Extended Term Loans shall notify the Administrative Agent (an Extension Election) on or prior to the date specified in such Extension Request of the amount of its Loans under the Existing Term Loan Class which it has elected to request be converted into Extended Term Loans (subject to any minimum denomination requirements reasonably imposed by the Administrative Agent and acceptable to the Borrower). In the event that the aggregate amount of Loans under the Existing Term Loan Class subject to Extension Elections exceeds the amount of Extended Term Loans requested pursuant to an Extension Request, Loans of the Existing Term Loan Class subject to Extension Elections shall be converted to Extended Term Loans on a pro rata basis based on the amount of Loans included in each such Extension Election (subject to any minimum
denomination requirements reasonably imposed by the Administrative Agent and acceptable to the Borrower).
(d) Extended Term Loans shall be established pursuant to an Additional Credit Extension Amendment to this Agreement among the Borrower, the Administrative Agent and each Extending Term Lender which shall be consistent with the provisions set forth above (but which shall not require the consent of any other Lender other than those consents required pursuant to this Agreement). Each Additional Credit Extension Amendment shall be binding on the Lenders, the Loan Parties and the other parties hereto. In connection with any Additional Credit Extension Amendment, the Loan Parties and the Administrative Agent shall enter into such amendments to the Collateral Documents as may be reasonably requested by the Administrative Agent (which shall not require any consent from any Lender other than those consents provided pursuant to this Agreement) in order to ensure that the Extended Term Loans are provided with the benefit of the applicable Collateral Documents and shall deliver such other documents, certificates and opinions of counsel in connection therewith as may be reasonably requested by the Administrative Agent. No Lender shall be under any obligation to provide any Extended Term Loan.
(e) The provisions of this Section 2.13 shall override any provision of Section 11.01 to the contrary.
2.14 Loan Repricing Protection. In the event that the Borrower, on or prior to the date that is one yearsix months after the ClosingAmendment No. 1 Effective Date (x) prepays, refinances, substitutes or replaces any Term B Loans in connection with a Repricing Transaction (including, for avoidance of doubt, any prepayment made pursuant to Section 2.03(b)(iii) that constitutes a Repricing Transaction) or (y) effects any amendment of this Agreement resulting in a Repricing Transaction, the Borrower shall pay to the Administrative Agent, for the account of each of the applicable Lenders, (I) in the case of clause (x), a prepayment premium of 1.00% of the aggregate principal amount of the Term B Loans of such Lender so prepaid, refinanced, substituted or replaced and (II) in the case of clause (y), a fee equal to 1.00% of the aggregate principal amount of the applicable Term B Loans of such Lender outstanding immediately prior to such amendment. Such amounts shall be due and payable on the date of effectiveness of such Repricing Transaction.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Tax unless required by applicable Law, provided that if any Loan Party or any other withholding agent shall be required by applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable by the Loan Party shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the Administrative Agent or any Lender, as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable withholding agent shall make such deductions and (iii) the applicable withholding agent shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Law. For purposes of this Section 3.01, any payments by the Administrative Agent to a Lender of any amounts received by the Administrative Agent from any Loan Party on behalf of such Lender shall be treated as a payment from the Loan Party to such Lender.
(b) Payment of Other Taxes by the Loan Parties. Without limiting the provisions of subsection (a) above, the Loan Parties shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Law.
(c) Indemnification by the Loan Parties. The Loan Parties shall, jointly and severally, indemnify the Administrative Agent and each Lender, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01) paid by the Administrative Agent or such Lender, as the case may be, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the applicable Loan Party to a Governmental Authority, the applicable Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(e) Status of Foreign Lenders. To the extent it is legally entitled to do so, any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the applicable Loan Party is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Loan Parties (with a copy to the Administrative Agent), at the time or times prescribed by applicable Law or reasonably requested by the Loan Parties or the Administrative Agent, such properly completed and executed documentation prescribed by applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Loan Parties or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Loan Parties or the Administrative Agent as will enable the Loan Parties or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Each 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(e) or Section 3.01(f)) 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 the Administrative Agent that it is legally unable to do so.
Without limiting the generality of the foregoing, any Foreign Lender, to the extent it is legally entitled to do so, shall deliver to the Loan Parties and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Loan Parties or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:
(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,
(ii) duly completed copies of Internal Revenue Service Form W-8ECI,
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (A) a certificate substantially in the form of Exhibit J-1, Exhibit J-2, Exhibit J-3 and Exhibit J-4 (each such certificate, a U.S. Tax Certificate) and (B) duly completed copies of Internal Revenue Service Form W-8BEN,
(iv) to the extent a Foreign Lender is not the beneficial owner of any obligations of the Loan Parties hereunder (for example, where the Foreign Lender is a partnership or participating Lender granting a typical participation), duly completed copies of Internal Revenue Service Form W-8IMY, accompanied by a Form W-8ECI, W-8BEN, U.S. Tax Compliance Certificate, Form W-9 or Form W-8IMY from each beneficial owner, as applicable, or
(v) two properly completed and duly signed original 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, U.S. federal withholding tax on any payments to such Lender under the Loan Documents.
(f) Status of Non-Foreign Lenders. Any Lender that is not a Foreign Lender shall deliver to the Loan Parties and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Loan Parties or the Administrative Agent), executed originals of Internal Revenue Service Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax.
(g) FATCA. If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Loan Parties and the Administrative Agent at the time or times prescribed by Law and at such time or times reasonably requested by the Loan Parties 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 Loan Parties or the Administrative Agent as may be necessary for the Loan Parties and the Administrative Agent to comply with their obligations under FATCA and to determine whether such Lender has complied with such Lenders obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this clause (g), FATCA shall include any amendments made to FATCA after the date of this Agreement.
(h) Treatment of Certain Refunds. If the Administrative Agent or any Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the applicable Loan Party or with respect to which the applicable Loan Party has paid additional amounts pursuant to this Section 3.01, it shall pay to the Loan Parties an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Loan Parties under this Section 3.01 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses (including any Taxes) of the Administrative Agent or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the applicable Loan Party, upon the request of the Administrative Agent or such Lender, agree to repay the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender if the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns
(or any other information relating to its taxes that it deems confidential) to the Loan Parties or any other Person.
3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBO Rate Loans, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue LIBO Rate Loans or to convert Base Rate Loans to LIBO Rate Loans shall be suspended 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, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all LIBO Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBO Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBO Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
3.03 Inability to Determine Rates. If the Administrative Agent (in the case of clause (a) or (b) below) or the Required Lenders (in the case of clause (c)) determine that for any reason in connection with any request for a LIBO 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 LIBO Rate Loan, (b) adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan, or (c) the LIBO Rate for any requested Interest Period with respect to a proposed LIBO 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, the obligation of the Lenders to make or maintain LIBO Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders in the case of clause (c)) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of LIBO Rate Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.
3.04 Increased Costs; Reserves on LIBO 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(e));
(ii) subject any Lender to any Taxes (other than (A) Indemnified Taxes covered in Section 3.01, or (B) Excluded Taxes) with respect to this Agreement or any Loan made by it; or
(iii) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or LIBO Rate Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any LIBO Rate Loan (or of maintaining its obligation to make any such Loan), or to reduce
the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, 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.
(b) Capital Requirements. If any Lender 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 such Lender, to a level below that which such Lender or such Lenders holding company 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 the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such holding company for any such reduction suffered.
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section 3.04, in reasonable detail sufficient to allow the Borrower to verify such calculation, and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section 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 this Section 3.04 for any increased costs incurred or reductions suffered more than six months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lenders intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof).
(e) Reserves on LIBO 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 LIBO 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.
3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, 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 Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or
(c) any assignment of a LIBO Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 11.13;
including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained, but excluding loss of anticipated profits. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For the avoidance of doubt, notwithstanding the foregoing, no Lender shall demand, and the Borrower shall not be obliged to make, any funding loss payments pursuant to this Section 3.05 with respect to the payment of accrued interest on the Amendment No. 1 Effective Date with respect to the Converted Initial Loans.
For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each LIBO Rate Loan made by it at the LIBO Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such LIBO Rate Loan was in fact so funded.
3.06 Mitigation Obligations; Replacement of Lenders.
(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Defaulting Lender, the Borrower may replace such Lender in accordance with Section 11.13.
3.07 Survival. All of the Borrowers obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.
ARTICLE IV
CONDITIONS PRECEDENT TO BORROWINGS
4.01 Conditions of Initial Borrowing. The obligation of each Lender to make its Term Loan hereunder on the Closing Date is subject to the prior or substantially concurrent satisfaction or waiver pursuant to Section 11.01 of the following conditions:
(a) The Administrative Agents receipt of the following, each in form and substance reasonably satisfactory to the Administrative Agent:
(i) executed counterparts of this Agreement and the Perfection Certificate by each of the parties thereto;
(A) the Security Agreement and the Pledge Agreement, each duly executed by each Loan Party party thereto, together with:
(B) the certificate representing the Pledged Equity referred to in the Swedish Pledge Agreement accompanied by an undated stock power executed in blank or endorsement (to the extent not previously delivered to the Administrative Agent),
(C) UCC financing statements in form satisfactory to the Administrative Agent for filing under the Uniform Commercial Code of all jurisdictions in which any Loan Party is organized, and
(D) evidence that all other action that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under the Collateral Documents has been taken (including receipt of duly executed payoff letters and UCC-3 termination statements);
(ii) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party;
(iii) good standing or active status certificates, as applicable, of each Loan Party in its jurisdiction of organization and, to the extent reasonably requested by the Administrative Agent, bring-down good standing or active status certificates, as applicable;
(iv) an opinion (A) of Latham & Watkins LLP, counsel to the Loan Parties and (B) Swedish counsel to the Loan Parties, each in form and substance reasonably satisfactory to the Administrative Agent;
(v) a certificate signed by a Responsible Officer of the Borrower certifying that the conditions specified in Sections 4.01(d) and (e) have been satisfied;
(vi) a certificate signed by a Responsible Officer of the Borrower certifying that, after giving effect to the Transaction, the Loan Parties on a Consolidated basis are Solvent;
(vii) certificates of insurance naming the Collateral Agent, on behalf of the Lenders, as an additional insured or loss payee, as the case may be, under all insurance policies maintained with respect to the assets and properties of the Loan Parties that constitute Collateral as may be requested by the Administrative Agent;
(viii) a copy of the ABL Credit Agreement executed by the parties thereto;
(ix) executed counterparts of the Intercreditor Agreement from each of the parties thereto;
(x) results of searches or other evidence reasonably satisfactory to the Collateral Agent (in each case dated as of a date reasonably satisfactory to the Collateral Agent) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Liens and Liens for which termination statements and releases or subordination agreements are being tendered on the Closing Date; and
(xi) duly executed payoff letter, in form and substance reasonably satisfactory to it, confirming that the Existing Term Loan Facility has been, or concurrently with the Closing Date is being, terminated and all Liens securing obligations thereunder have been, or concurrently with the Closing Date are being released; and
(xii) such other certificates, documents, consents or opinion as the Administrative Agent may reasonably require.
(b) Evidence satisfactory to the Administrative Agent that the Existing ABL Facility has been, or concurrently with the Closing Date is being, terminated and all Liens securing obligations thereunder have been, or concurrently with the Closing Date are being, released.
(c) Evidence satisfactory to the Administrative Agent that the Existing Mezzanine Notes have been, or concurrently with the Closing Date are being repaid.
(d) The representations and warranties of the Borrower and each other Loan Party shall be true and correct on and as of the Closing Date, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date.
(e) No Default shall exist or would result from such proposed Term Loan or from the application of the proceeds thereof.
(f) The Administrative Agent shall have received a Committed Loan Notice in accordance with the requirements hereof.
(g) The Lenders shall have received, to the extent requested, all documentation and other information required by regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act.
Without limiting the generality of the provisions of Section 9.07, 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 the Loan Parties represents and warrants to the Administrative Agent and the Lenders that:
5.01 Existence, Qualification and Power. Each Loan Party and each of its Restricted Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good standing or of active status under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, permits, authorizations, consents and approvals to (i) own or lease its assets and carry on its business as currently conducted or proposed to be conducted, and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good standing or of active status under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Schedule 5.01 annexed hereto sets forth, as of the Closing Date, each Loan Partys name as it appears in official filings in its state of incorporation or organization, its state of incorporation or organization, organization type, organization number, if any, issued by its state of incorporation or organization and its Federal employer identification number.
5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Persons Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of (or the requirement to create) any Lien under, or require any payment to be made under (i) any Contractual Obligation or Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of the Restricted Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any applicable Law, except in the case of clause (b) or (c), to the extent that such conflict, breach, contravention or violation could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document or the ABL Loan Documents, except for (a) filings necessary to perfect the Liens on the Collateral granted by the Loan Parties pursuant to the Collateral Documents, (b) the approvals, consents, exemptions, authorizations, actions, notices and filings that have been duly obtained, taken, given or made and are in full force and effect and (c) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make would not reasonable be expected to have, individually or in the aggregate, a Material Adverse Effect.
5.04 Binding Effect. This Agreement and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
5.05 Financial Statements; No Material Adverse Effect; No Internal Control Event.
(a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (ii) fairly present in all material respects the financial condition of the Borrower and the Restricted Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein.
(b) Since February 27, 2011, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.
(c) The Consolidated forecasted balance sheet, statements of income and cash flows of Holdings and its Subsidiaries delivered pursuant to Section 4.01 or Section 6.01, when taken as a whole, were prepared in good faith on the basis of the assumptions stated therein, which assumptions were reasonable in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, a reasonable estimate of the Borrowers and its Subsidiaries future financial condition and performance (it being understood that (i) no forecasts are to be viewed as facts, (ii) any forecasts are subject to significant uncertainties and contingencies, (iii) no assurance can be given that any particular forecasts will be realized and (iv) actual results may differ and such differences may be material).
5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties threatened at law, in equity, in arbitration or before any Governmental Authority, by or against Holdings or any of its Restricted Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or (b) would reasonably be expected to have a Material Adverse Effect.
5.07 Ownership of Property; Liens; Investments.
(a) Each Loan Party and each of the Restricted Subsidiaries has good record, marketable and insurable title in fee simple to all owned Real Estate necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Loan Party and each of the Restricted Subsidiaries has good record and marketable title to, or valid leasehold interests in, all personal property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Mortgage encumbers improved owned Real Estate that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance has been obtained in accordance with Section 6.07(b).
(b) The properties and assets of each Loan Party and each of the Restricted Subsidiaries are subject to no Liens, other than (i) with respect to Mortgaged Property, Permitted Encumbrances and (ii) with respect to all other properties and assets, Permitted Liens.
(c) Schedule 5.07(c) sets forth a complete and accurate list as of the Closing Date of all Real Estate owned by each Loan Party and each of the Restricted Subsidiaries showing the street address, county or other relevant jurisdiction, state, record owner and book and estimated fair value thereof.
(d) (i) Schedule 5.07(d)(i) sets forth a complete and accurate list of all Leases under which any Loan Party is the lessee, as of the Closing Date showing the street address, county or other relevant jurisdiction, state, lessor, lessee and expiration date.
(ii) Schedule 5.07(d)(ii) sets forth a complete and accurate list of all leases of Real Estate under which any Loan Party is the lessor as of the Closing Date showing the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof.
(e) Schedule 5.07(e) sets forth a complete and accurate list of all Investments held by any Loan Party or any Restricted Subsidiary of a Loan Party on the date hereof, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof.
5.08 Environmental Matters.
(a) Neither any Loan Party nor any Restricted Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any Environmental Permit, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability, except, in each case, as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Except as would not reasonably be expected to result in a Material Adverse Effect, (i) none of the properties currently or, to the knowledge of the Loan Parties, formerly owned, leased, or operated by any Loan Party or any Restricted Subsidiary is listed or, to the knowledge of the Loan Parties, proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; (ii) none of the properties to which any Loan Party or any Restricted Subsidiary has, directly or indirectly, transported or arranged for the transportation of any Hazardous Materials, is listed or, to the knowledge of the Loan Parties, proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list; (iii) there are no and, to the knowledge of the Loan Parties, never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned, leased, or operated by any Loan Party or any Restricted Subsidiary or, to the knowledge of the Loan Parties, on any property formerly owned, leased, or operated by any Loan Party or any Restricted Subsidiary; (iv) there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any Restricted Subsidiary; and (v) Hazardous Materials have not been Released, discharged or disposed of on any property currently or, to the knowledge of the Loan Parties, formerly owned, leased, or operated by any Loan Party or any Restricted Subsidiary.
(c) (i) Neither any Loan Party nor any Restricted Subsidiary is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened Release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law, except as would not reasonably be expected to result in a Material Adverse Effect; and (ii) all Hazardous Materials generated, used, treated, handled, stored, or transported by, or on behalf of, any Loan Party or any Restricted Subsidiary have been disposed of in a manner which would not reasonably expected to result in a Material Adverse Effect.
5.09 Taxes. The Loan Parties and their Restricted Subsidiaries have filed all material Tax returns and reports required to be filed, and have paid all Taxes levied or imposed upon them or their properties, income or assets otherwise due and payable and have satisfied all of their Tax withholding
obligations, except (i) Taxes which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP and which contest effectively suspends the collection of the contested obligation and the enforcement of any Lien securing such obligation and (ii) any Tax return, report or Taxes, the failure to file or to pay, as the case may be, would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. There is no proposed Tax deficiency or assessment known to any Loan Party against the Loan Party or any Subsidiary that would, if made, individually or in the aggregate, have a Material Adverse Effect. Except as could not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect, each Loan Party and each of its Subsidiaries has made adequate provisions in accordance with GAAP for all Taxes not yet due and payable.
5.10 ERISA Compliance.
(a) Except as could not reasonably be expected to result in a Material Adverse Effect, (i) each Plan is in compliance with its terms and the applicable provisions of ERISA and the Code, (ii) each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of the Borrower, nothing has occurred which could reasonably be expected to prevent, or cause the loss of, such qualification, and (iii) Holdings, the Borrower and each ERISA Affiliate have made all required contributions to each Pension Plan, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Pension Plan.
(b) There are no pending or, to the knowledge of the Loan Parties, threatened claims (other than claims for benefits in the normal course), actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There has been no nonexempt prohibited transaction (as defined in Section 406 of ERISA and Section 4975 of the Code) or violation of the fiduciary responsibility rules by Holdings or the Borrower with respect to any Plan that, individually or in the aggregate, has resulted or could reasonably be expected to result in a Material Adverse Effect.
(c) Except as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect: (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability as of the most recent valuation date for such Pension Plan; (iii) none of Holdings, the Borrower or any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) none of Holdings, the Borrower or any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) none of Holdings, the Borrower or any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
(d) Except as would not reasonably be expected to result in a Material Adverse Effect: (i) each Foreign Plan has been maintained in compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities; (ii) none of Holdings, the Borrower or any Restricted Subsidiary have incurred any obligation in connection with the termination of or withdrawal from any Foreign Plan; and (iii) the present value of the accrued benefit liabilities (whether or not vested) under each Foreign Plan which is funded, determined as of the end of the most recently ended Fiscal Year of Holdings, the Borrower or any Restricted Subsidiary (based on the actuarial
assumptions used for purposes of the applicable jurisdictions financial reporting requirements), did not exceed the current value of the assets of such Foreign Plan (and for each Foreign Plan which is not funded, the obligations of such Foreign Plan are properly accrued).
5.11 Subsidiaries; Equity Interests; Loan Parties. As of the Closing Date, no Loan Party has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.11, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.11 free and clear of all Liens except those created under the Collateral Documents and the ABL Loan Documents and the Swedish Credit Facility and any nonconsensual Lien that is permitted under Section 7.01. As of the Closing Date no Loan Party has any equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.11.
5.12 Margin Regulations; Investment Company Act.
(a) None of the proceeds of the Loans shall be used in any manner that would result in a violation of Regulations T, U or X of the FRB.
(b) None of the Loan Parties or any Restricted Subsidiary is or is required to be registered as an investment company under the Investment Company Act of 1940.
5.13 Disclosure. No written report, financial statement, certificate or other information (including the Information Memorandum) furnished by or on behalf of the Loan Parties to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case as modified or supplemented by other information so furnished), taken as a whole, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
5.14 Compliance with Laws. Each Loan Party and each Restricted Subsidiary thereof is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
5.15 Intellectual Property; Licenses, Etc. Each Loan Party and each of its Restricted Subsidiaries own, or possess the right to use, all of the Intellectual Property that are reasonably necessary for the operation of their respective businesses, except as would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, and Schedule 5.15 sets forth a complete and accurate list of all such Intellectual Property owned by each Loan Party and each of its Restricted Subsidiaries which are registered with the United States Patent and Trademark Office and United States Copyright Office. To the knowledge of the Borrower, no slogan or other advertising or other material or patent, trademark or copyright now employed by any Loan Party or any of its Restricted Subsidiaries infringes upon any Intellectual Property right held by any other Person, except to the extent that any such infringement could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 5.15, no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Loan Parties, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
5.16 Solvency. On a Consolidated basis, after giving effect to the Transaction, the Loan Parties are Solvent.
5.17 Casualty, Etc. Neither the businesses nor the properties of any Loan Party or any of the Restricted Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
5.18 Labor Matters. There are no strikes, lockouts, slowdowns or other material labor disputes against any Loan Party pending or, to the knowledge of any Loan Party, threatened that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower and Holdings, (i) the hours worked by and payments made to employees of the Loan Parties comply in all material respects with the Fair Labor Standards Act and any other applicable Federal, state, local or foreign Law dealing with such matters, (ii) no Loan Party has incurred any material liability or obligation under the Worker Adjustment and Retraining Act or similar state Law and (iii) all payments due from any Loan Party, or for which any claim may be made against any Loan Party, on account of wages and employee health and welfare insurance and other benefits, have been paid or properly accrued in all material respects in accordance with GAAP as a liability on the books of such Loan Party. There are no representation proceedings pending or, to any Loan Partys knowledge, threatened to be filed with the National Labor Relations Board, and no labor organization or group of employees of any Loan Party has made a pending demand for recognition except those that could not reasonably be expected to have a Material Adverse Effect. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair employment practices charges or any other claims or complaints against any Loan Party pending or, to the knowledge of any Loan Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any employee of any Loan Party except those that could not reasonably be expected to have a Material Adverse Effect.
5.19 Collateral Documents. The provisions of the Collateral Documents are effective to create in favor of the Collateral Agent for the benefit of the Credit Parties a legal, valid and enforceable First Priority Lien or Second Priority Lien, as applicable (subject to Permitted Liens), on all right, title and interest of the respective Loan Parties in the Collateral described therein, and (i) when all appropriate filings or recordings are made in the appropriate offices as may be required under applicable law and (ii) upon the taking of possession or control by the Collateral Agent of such Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent required by any Collateral Document), such Collateral Document will constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in such Collateral. Prior to the satisfaction of the Discharge of ABL Obligations, the representations made in this Section 5.19 with respect to possession or control of any Collateral on which there is a Second Priority Lien by the Collateral Agent shall be deemed to refer to the possession or control of such Collateral by the collateral agent for the ABL Facility (holding for the benefit of the Collateral Agent for the Credit Parties).
5.20 USA PATRIOT Act. To the extent applicable, each of Holdings and its Restricted Subsidiaries is in compliance, in all material respects, with (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto and (ii) the USA PATRIOT Act. No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than (i) any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement and (ii) Obligations under Other Liabilities), the Borrower shall, and shall (except in the cases of the covenants set forth in Sections 6.01, 6.02 and 6.03) cause each Restricted Subsidiary to:
6.01 Financial Statements and Other Reports.
Deliver to the Administrative Agent, in form and detail reasonably acceptable to the Administrative Agent:
(a) as soon as available, but in any event within 105 days after the end of each Fiscal Year of Holdings, a Consolidated balance sheet of Holdings and its Subsidiaries as at the end of such Fiscal Year, and the related Consolidated statements of income or operations, shareholders equity (if available) and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of Ernst & Young LLP or another Registered Public Accounting Firm of nationally recognized standing reasonably satisfactory to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any going concern or like qualification or exception or any qualification or exception as to the scope of such audit;
(b) as soon as available, but in any event within 50 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of Holdings (commencing with the Fiscal Quarter ending May 26, 2012), a Consolidated balance sheet of Holdings and its Subsidiaries as at the end of such Fiscal Quarter, and the related Consolidated statements of income or operations and cash flows for such Fiscal Quarter and for the portion of Holdings Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year and to the figures as set forth in the projections delivered pursuant to Section 6.01(c), all in reasonable detail, certified by a Responsible Officer on behalf of Holdings as fairly presenting in all material respects the financial condition, results of operations, shareholders equity and cash flows of Holdings and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments, including, but not limited to, purchase accounting adjustments, and the absence of footnotes;
(c) as soon as available, but in any event no later than 60 days after the end of each Fiscal Year of Holdings commencing at the end of the Fiscal Year ending February 23, 2013, an annual budget of Holdings and its Subsidiaries on a Consolidated basis for the following Fiscal Year, as customarily prepared by management of the Loan Parties for its internal use of Holdings and its Subsidiaries; and
(d) simultaneously with the delivery of each set of financial statements referred to in Section 6.01(a) and Section 6.01(b) above, the related consolidating financial statements
reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries and variable interest entities (if any) from such financial statements and a management narrative report providing reasonable detail on the financial results of Holdings for the period covered by such financial statements compared to the corresponding prior year period and the key factors (as determined in good faith by the Borrower) causing such changes.
6.02 Certificates; Other Information. Deliver to the Administrative Agent, in form and detail reasonably satisfactory to the Administrative Agent:
(a) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the financial statements for the period ending May 26, 2012), (i) a duly completed Compliance Certificate signed by a Responsible Officer of Holdings and (ii) notice of any change in the location of any office in which a Loan Party maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility);
(b) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which Holdings or the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;
(c) not later than seven (7) Business Days after receipt thereof by any Loan Party or any Restricted Subsidiary thereof, copies of all notices, requests and other documents (including amendments, waivers and other modifications) so received under or pursuant to any instrument, indenture, loan or credit or similar agreement regarding or related to any breach or default by any party thereto or any other event that, in each case, could have a Material Adverse Effect;
(d) promptly after any Loan Party has knowledge thereof, written notice of (i) any action or proceeding relating to any Environmental Law pending or threatened against any Loan Party or any of its Subsidiaries, (ii) any noncompliance with any Environmental Law by any Loan Party or any of its Subsidiaries, (iii) the existence of any Environmental Liability, or (iv) the existence of any Release of Hazardous Materials at any property currently or formerly owned, leased or operated by any Loan Party or any of its Subsidiaries, which action, proceeding, non-compliance, Environmental Liability or Release could (x) reasonably be expected to have a Material Adverse Effect, or (y) cause any property described in the Mortgages to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law;
(e) as soon as available, but in any event within thirty (30) days after the end of each Fiscal Year of the Borrower, to the extent that it would reflect information not previously delivered to the Administrative Agent, (i) a report supplementing Schedules 5.07(c), 5.07(d)(i) and 5.07(d)(ii), including an identification of all owned real property disposed of by any Loan Party or any Subsidiary thereof and all leased real property disposed of by any Loan Party or any Domestic Subsidiary during such Fiscal Year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof and, in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all Real Estate acquired or leased during such Fiscal Year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete; (ii) a report supplementing Schedules 5.07(e) and 5.11 containing a description of all changes in the information included in such Schedules as may be necessary for such
Schedules to be accurate and complete, each such report to be signed by a Responsible Officer of Holdings and to be in a form reasonably satisfactory to the Administrative Agent and (iii) a duly completed Perfection Certificate Supplement;
(f) at least five (5) Business Days prior written notice (or such shorter period as to which the Administrative Agent in its sole discretion agrees) of any change in (i) any Loan Partys name, (ii) any Loan Partys organizational structure or jurisdiction of incorporation or formation or (iii) any Loan Partys Federal Taxpayer Identification Number or organizational identification number assigned to it by its state of organization;
(g) promptly after the request by any Lender, all documentation and other information that such Lender reasonably 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;
(h) ERISA Filings, Etc. Upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan; (ii) the most recent actuarial valuation report for each Pension Plan; and (iii) all notices received by any ERISA Affiliate from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and
(i) promptly, such additional information regarding the business, financial, legal or corporate affairs of any Loan Party or any Restricted Subsidiary thereof, or compliance with the terms of the Loan Documents, as the Administrative Agent may from time to time reasonably request.
Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(b) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrowers website on the Internet at the website address listed on Schedule 11.02; or (ii) on which such documents are posted on the Borrowers behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that (i) upon request, the Borrower shall deliver paper copies of such documents to the Administrative Agent, and (ii) the Borrower shall notify the Administrative Agent (by telecopier or electronic mail) 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. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Arrangers will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, Borrower Materials) by posting the Borrower Materials on Intra Links or another similar electronic system (the Platform) and (b) certain of the Lenders may be public-side Lenders (i.e., Lenders that do not wish to receive material nonpublic information with respect to the Borrower or its securities) (each, a Public Lender). The Borrower hereby agrees that at any time that the Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities it will use
commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials 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 deemed to have authorized the Administrative Agent, the Arrangers and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 11.07); (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated Public Investor; and (z) the Administrative Agent and the Arrangers shall be entitled to treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not designated Public Investor.
6.03 Notices. Promptly, after knowledge thereof by a Responsible Officer, notify the Administrative Agent, who shall promptly notify the Lenders:
(a) of the occurrence of any Default;
(b) of any matter that has resulted or would reasonably be expected to result in a Material Adverse Effect, including as a result of (i) breach or non-performance of, or any default under, a Contractual Obligation of any Loan Party or any Restricted Subsidiary thereof; (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary thereof and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Restricted Subsidiary thereof, including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any ERISA Event that would reasonably be expected to result in a Material Adverse Effect;
(d) of any material change in accounting policies or financial reporting practices by any Loan Party or any Restricted Subsidiary thereof;
(e) [reserved];
(f) of (i) any casualty or other insured damage to any portion of the Collateral or (ii) the commencement of any action or proceeding for the taking of any interest in a portion of the Collateral under power of eminent domain or (iii) any condemnation or similar proceeding or if any portion of the Collateral is damaged or destroyed; provided, however, that with respect to each of clauses (i), (ii) and (iii), the amount of Collateral affected thereby shall have an aggregate fair market value in excess of (A) $15.0 million, in the case of Term Priority Collateral or (B) $5.0 million, in the case of ABL Priority Collateral;
(g) of any change in Holdings or the Borrowers chief executive officer or chief financial officer; and
(h) any termination, withdrawal or resignation of Holdings or the Borrowers Registered Public Accounting Firm.
Each notice pursuant to Section 6.03(a) shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.
6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable (a) all Taxes upon it or its properties or assets in all respects, unless the same are being contested in good faith by appropriate proceedings diligently conducted, adequate reserves in accordance with GAAP are being maintained by such Loan Party or such Restricted Subsidiary and such contest effectively suspends the collection of the contested obligation and the enforcement of any Lien securing such obligation; except for Taxes that could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; and (b) all material lawful claims which, if unpaid, would by law become a Lien upon its property (except as set forth in clause (a) above).
6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization, except for (i) transactions permitted by Section 7.04 or 7.05 and (ii) with respect to the maintenance of good standing status of any Loan Party, it will not be a breach of clause (a) of this Section 6.05 unless the failure to maintain good standing of such Loan Party could reasonably be expected to have a Material Adverse Effect; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation or non-renewal of which could reasonably be expected to have a Material Adverse Effect.
6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear, casualty or condemnation excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except, in each case, where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
6.07 Maintenance of Insurance.
(a) Maintain with financially sound and reputable insurance companies not Affiliates of the Loan Parties, insurance with respect to its properties and business against loss or damage (i) of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons or (ii) substantially similar to insurance maintained by the Borrower and its Restricted Subsidiaries on the Closing Date, in each case, subject to such changes as the Borrower may reasonably deem appropriate in its business judgment with respect to deductibles, self-insured amounts, coverage exclusions and maximum covered losses (provided that none of such policies shall include a co-insurance clause), and with respect to policies for Holdings and the Domestic Subsidiaries, providing for not less than 30 days prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance.
(b) With respect to each improved Real Estate subject to a Mortgage, obtain flood insurance with coverages and in amounts sufficient to comply with the Flood Insurance Laws and, in any event, in an amount not less than $5.0 million for Zone A special flood hazard areas and $10.0 million for all other special flood hazard areas, in each case, as set forth on any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), otherwise comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and deliver to the Administrative Agent evidence of such compliance in form and substance reasonably acceptable to the Administrative Agent.
(c) Fire and extended coverage policies maintained with respect to any Collateral shall be endorsed or otherwise amended to include (i) a mortgage clause (regarding improvements to
Real Estate) and lenders loss payable clause (regarding personal property), in form and substance satisfactory to the Collateral Agent, which endorsements or amendments shall provide that the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Collateral Agent, and (ii) such other provisions as the Collateral Agent may reasonably require from time to time to protect the interests of the Credit Parties. Commercial general liability policies shall be endorsed to name the Collateral Agent as an additional insured. Business interruption policies with respect to Holdings and the Domestic Subsidiaries shall name the Collateral Agent as a loss payee and shall be endorsed or amended to include (i) a provision that, from and after the Closing Date, the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Collateral Agent, and (ii) such other provisions as the Collateral Agent may reasonably require from time to time to protect the interests of the Credit Parties. Each such policy referred to in this Section 6.07 shall also provide that it shall not be canceled or not renewed (i) by reason of nonpayment of premium except upon not less than ten (10) days prior written notice thereof by the insurer to the Collateral Agent (giving the Collateral Agent the right to cure defaults in the payment of premiums) or (ii) for any other reason except upon not less than thirty (30) days prior written notice thereof by the insurer to the Collateral Agent. The Borrower shall deliver to the Collateral Agent, prior to the cancellation, modification adverse to the Lenders, or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Collateral Agent, including an insurance binder) together with evidence satisfactory to the Collateral Agent of payment of the premium therefor.
(d) In the event that any part of the Collateral (other than, as long as the ABL Facility is outstanding, ABL Priority Collateral) is damaged by fire or other casualty and the insurance proceeds for such damage are greater than $5.0 million in any Fiscal Year, such proceeds, in their entirety, shall be delivered to the Administrative Agent and the Administrative Agent shall promptly apply such proceeds in accordance with Section 2.03(b) or 8.03, as applicable. In the event any part of the Collateral (other than, as long as the ABL Facility is outstanding, ABL Priority Collateral) is damaged by fire or other casualty and the insurance proceeds for such damage are less than $5.0 million in any Fiscal Year, such proceeds, in their entirety, shall be delivered to the Borrower, and
(e) None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 6.07. Each Loan Party shall look solely to its insurance companies or any other parties other than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees. If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Loan Parties hereby agree, to the extent permitted by law, to waive their right of recovery, if any, against the Credit Parties and their agents and employees. The designation of any form, type or amount of insurance coverage by any Credit Party under this Section 6.07 shall in no event be deemed a representation, warranty or advice by such Credit Party that such insurance is adequate for the purposes of the business of the Loan Parties or the protection of their properties.
6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been set aside and maintained by the Loan Parties in accordance with GAAP; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
6.09 Books and Records. Maintain proper books of record and account, in which entries in conformity in all material respects with GAAP under U.S. law, with respect to Holdings and its Domestic Subsidiaries, and under applicable foreign law, with respect to Foreign Subsidiaries (provided
that nothing in this Section 6.09 shall affect the obligation of Holdings to provide financial statements in accordance with GAAP under Section 6.01), consistently applied shall be made of all financial transactions and matters involving the assets and business of the Loan Parties and their Restricted Subsidiaries, as the case may be.
6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent (accompanied by any Lender (with the consent of the Borrower (not to be unreasonably withheld)) to visit and inspect any of its properties, to examine its corporate, financial, insurance, 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 such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that unless an Event of Default has occurred and is continuing, the Administrative Agent may make only one such visit in any Fiscal Year 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 to the extent practicable.
6.11 Use of Proceeds. Use the proceeds of (a) the Loans made on the Closing Date solely to finance in part the Transaction and to pay related fees and expenses and (b) the Incremental Term Loans only for the purposes specified in the applicable Additional Credit Extension Amendment.
6.12 Covenant to Guarantee Obligations and Give Security.
(a) Upon the formation or acquisition of any new direct or indirect Subsidiary (other than any Unrestricted Subsidiary, a CFC, a Subsidiary that is held directly or indirectly by a CFC or any Domestic Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of the assets of such Domestic Subsidiary consist of Equity Interests in one or more Foreign Subsidiaries) by any Loan Party, then the Borrower shall, at the Borrowers expense, within the time period specified below unless the Administrative Agent in its sole discretion consents to an extension thereof:
(i) within 10 Business Days after such formation or acquisition, cause such Subsidiary, and cause each direct and indirect parent of such Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a counterpart to this Agreement, in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties obligations under the Loan Documents,
(ii) within 15 Business Days after such formation or acquisition, cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to duly execute and deliver to the Administrative Agent supplements to the Collateral Documents and other security and pledge agreements covering the personal property of such Subsidiaries, as specified by and in form and substance satisfactory to the Administrative Agent (including delivery of all Pledged Debt and Pledged Equity in and of such Subsidiary, and other instruments of the type specified in Section 4.01(a)(ii)), securing payment of all the Obligations of such Subsidiary or such parent, as the case may be, under the Loan Documents and constituting Liens on all such personal properties,
(iii) within 15 Business Days after such formation or acquisition, cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to take whatever action (including the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary in the
reasonable opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid and subsisting Liens on the personal properties purported to be subject to Collateral Documents, as applicable, and the security and pledge agreements delivered pursuant to this Section 6.12, enforceable against all third parties in accordance with their terms, and
(iv) within 15 Business Days after such formation or acquisition, deliver to the Administrative Agent, upon the request of the Administrative Agent in its sole discretion, a signed copy of a favorable opinion, addressed to the Administrative Agent and the other Credit Parties, of counsel for the Loan Parties acceptable to the Administrative Agent as to the matters contained in clauses (i), (ii) and (iii) above, and as to such other matters as the Administrative Agent may reasonably request.
(b) Subject to the Intercreditor Agreement, promptly grant to the Collateral Agent, within 30 days of the acquisition thereof, a security interest in and Mortgages on each parcel of Real Estate owned in fee by such Loan Party as is acquired by such Loan Party after the Closing Date and that, together with any improvements thereon, individually has a fair market value of at least $5.0 million as additional security for the Obligations (unless the subject property is already mortgaged to a third-party to the extent permitted by Section 7.01). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and the Collateral Agent and shall constitute valid and enforceable perfected Liens subject only to Permitted Liens or other Liens acceptable to the Administrative Agent. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Such Loan Party shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Estate (including (i) fully paid American Land Title Association Lenders Extended Coverage title insurance policies or applicable state title policy in form and substance, with endorsements and in amounts acceptable to the Administrative Agent, issued by title insurers reasonably acceptable to the Administrative Agent, insuring the Mortgages to be valid and subsisting Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics and materialmens Liens) and encumbrances, excepting only Permitted Encumbrances and other Liens permitted under the Loan Documents, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents, for mechanics and materialmens Liens and for zoning of the applicable property) and as the Administrative Agent may reasonably deem necessary or desirable (a Mortgage Policy), (ii) a Survey, (iii) the Flood Documentation and (iv) a local counsel opinion (in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent) in respect of such Mortgage).
(c) Concurrently with the guarantee by any direct or indirect Domestic Subsidiary that is a Restricted Subsidiary of any obligations under the ABL Loan Documents, cause such direct or indirect Subsidiary to guarantee the Obligations of the Loan Parties hereunder and otherwise comply with the requirements of this Section 6.12.
(d) At any time upon request of the Administrative Agent, promptly execute and deliver any and all further instruments and documents and take all such other action as the Administrative Agent may deem reasonably necessary or desirable in obtaining the full benefits of, or (as applicable) in perfecting and preserving the Liens of, such guaranties, deeds of trust, trust deeds, deeds to
secure debt, mortgages, leasehold mortgages, leasehold deeds of trust, supplements to the Collateral Documents and other security and pledge agreements.
(e) Subject to the terms of the Intercreditor Agreement and prior to the satisfaction of the Discharge of ABL Obligations, with respect to any obligation under this Section 6.12 or any Collateral Document to deliver possession or control of any Collateral on which there is a Second Priority Lien by the Collateral Agent, such obligation shall be deemed satisfied by the delivery of possession or control of such Collateral to the collateral agent for the ABL Facility (holding for the benefit of the Collateral Agent for the Credit Parties).
6.13 Further Assurances. Promptly upon request by the Administrative Agent, or any Lender through the Administrative Agent, (a) correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation of any of the foregoing, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to (i) carry out more effectively the purposes of the Loan Documents, (ii) to the fullest extent permitted by applicable Law, subject any Loan Partys or any of the Restricted Subsidiaries properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (iii) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Credit Parties the rights granted or now or hereafter intended to be granted to the Credit Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of the Restricted Subsidiaries is or is to be a party, and cause each of the Restricted Subsidiaries to do so.
6.14 Lenders Meetings. The Borrower will, upon the request of the Administrative Agent or Required Lenders, participate in a meeting of the Administrative Agent and Lenders once during each Fiscal Year to be held, at the request of the Administrative Agent or Required Lenders, by teleconference or at the Borrowers corporate offices (or at such other location as may be agreed to by the Borrower and the Administrative Agent) at such time as may be agreed to by the Borrower and the Administrative Agent.
6.15 Designation as Senior Debt. Designate all Obligations as Designated Senior Indebtedness (or any similar term) under, and defined in, any Subordinated Indebtedness of any Loan Party which contains such designations.
6.16 Maintenance of Ratings. Use commercially reasonable efforts to cause the Loans and the Borrowers corporate credit to continue to be rated by Standard & Poors Ratings Group and Moodys Investors Service Inc.
6.17 Designation of Subsidiaries. The board of directors of Holdings may at any time designate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Default shall have occurred and be continuing, (ii) the Borrower may not be designated as an Unrestricted Subsidiary, (iii) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a Restricted Subsidiary for the purpose of the ABL Facility, (iv) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary, (v) no Unrestricted Subsidiary shall own any Equity Interests in any Restricted Subsidiary, (vi) no Unrestricted Subsidiary shall hold any Indebtedness of, or any Lien on any property of, the Borrower or any Restricted Subsidiary, (vii) no
Unrestricted Subsidiary shall be a party to any transaction or arrangement with the Borrower and its Restricted Subsidiaries that would not be permitted by Section 7.08 and (viii) none of Holdings or any of its Restricted Subsidiaries shall have any obligation to subscribe for additional Equity Interests of any Unrestricted Subsidiary or to preserve or maintain the financial condition of any Unrestricted Subsidiary. The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an Investment by Holdings and its Restricted Subsidiaries therein at the date of designation in an amount equal to the net book value of Holdings or such Restricted Subsidiarys (as applicable) investment therein. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary existing at such time, and cause each of the Restricted Subsidiaries and Unrestricted Subsidiaries to satisfy, customary corporate and other formalities.
6.18 Post-Closing Matters. Within seven (7) days after the Closing Date (or such later date to be agreed by the Administrative Agent), the Borrower shall deliver to the Administrative Agent the certificates representing the Pledged Equity referred to in the Pledge Agreement accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank or with other appropriate instruments of transfer (to the extent not previously delivered to the Administrative Agent).
ARTICLE VII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than (i) any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement and (ii) Obligations under Other Liabilities), the Borrower shall not, (and with respect to Section 7.13 only, Holdings shall not), nor shall the Borrower permit any Restricted Subsidiary to, directly or indirectly:
7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, other than the following Liens (Liens described below are herein referred to as Permitted Liens):
(a) Liens pursuant to any Loan Document;
(b) Liens existing on the date hereof and listed on Schedule 7.01(b) and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed in any material manner, (ii) the amount secured or benefited thereby is not increased except as contemplated by Section 7.02(f), (iii) the direct and contingent obligors with respect thereto are not changed (other than to decrease the number of obligors), and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.02(f);
(c) Liens for taxes not yet due or which are the subject of a Permitted Protest;
(d) carriers, warehousemens, mechanics, materialmens, repairmens or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are the subject of a Permitted Protest;
(e) (i) pledges or deposits in the ordinary course of business in connection with workers compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in
respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to Holdings or any of its Restricted Subsidiaries;
(f) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances affecting Real Estate which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;
(h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h);
(i) Liens securing Indebtedness permitted under Section 7.02(h); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (ii) the Indebtedness secured thereby does not exceed the cost of the property being acquired on the date of acquisition, and (iii) such Lien and the Indebtedness secured thereby are incurred contemporaneously with or within two hundred seventy (270) days after the acquisition of such property;
(j) Liens on the Collateral securing ABL Obligations having the priority set forth in the Intercreditor Agreement;
(k) landlords and lessors Liens in respect of rent and other lease obligations that are not past due for a period of 60 days or more or that are the subject of a Permitted Protest;
(l) possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of Investments, provided that such Liens (a) attach only to such Investments and (b) secure only obligations incurred in the ordinary course and arising in connection with the acquisition or disposition of such Investments and not any obligation in connection with margin financing;
(m) Liens arising solely by virtue of any statutory or common law provisions relating to bankers Liens, ordinary course Liens in favor of securities intermediaries, rights of setoff or similar rights and remedies as to deposit accounts or securities accounts or other funds maintained with depository institutions or securities intermediaries;
(n) Liens arising from precautionary UCC filings regarding true operating leases or the consignment of goods to a Loan Party;
(o) Liens in favor of customs and revenues authorities imposed by applicable Law arising in the ordinary course of business in connection with the importation of goods and securing obligations (i) that are not overdue by more than thirty (30) days, or (ii) that are the subject of a Permitted Protest;
(p) Liens on specific existing assets and proceeds thereof of a Person acquired following the Closing Date in existence on the date such Person became a Restricted Subsidiary; provided that such Liens were not created in anticipation of the transaction pursuant to which such Person became a Restricted Subsidiary;
(q) licenses of Intellectual Property permitted under Section 7.05(g) hereof;
(r) Liens on the assets of Foreign Subsidiaries securing Indebtedness or other obligations of Foreign Subsidiaries permitted by Section 7.02;
(s) Liens on the Collateral securing Indebtedness permitted by Section 7.02(b);
(t) other Liens securing Indebtedness or other obligations of the Borrower and the Subsidiary Guarantors outstanding in an aggregate principal amount not to exceed $15.0 million; provided that no such Lien shall extend to or cover any Collateral;
(u) leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) in any case materially detract from the value of the property subject thereto or (ii) interfere in any material respect with the business of the Borrower and its Subsidiaries or (iii) secure any Indebtedness;
(v) Liens solely on any cash earnest money deposits made by the Borrower or any of the Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
(w) ground leases in respect of real property on which facilities owned or leased by the Borrower or any of its Subsidiaries are located; and
(x) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto.
7.02 Indebtedness. Create, incur, assume, guarantee, suffer to exist or otherwise become liable with respect to any Indebtedness, except (Indebtedness described below is herein referred to as Permitted Indebtedness):
(a) obligations (contingent or otherwise) of the Borrower or any of the Restricted Subsidiaries existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with fluctuations in interest rates or foreign exchange rates or otherwise to mitigate risks associated with its assets or liabilities or business operations, and (ii) such Swap Contract does not contain any provision exonerating the counterparty to such Swap Contract from its obligation to make payments on outstanding transactions to the Borrower or the Restricted Subsidiaries (notwithstanding that the Borrower or a Restricted Subsidiary is the defaulting party);
(b) Refinancing Debt Securities and any Permitted Refinancing Indebtedness in respect thereof;
(c) (i) Indebtedness of a Restricted Subsidiary of the Borrower owed to the Borrower or to another Restricted Subsidiary of the Borrower, and (ii) Indebtedness of the Borrower owed to any Restricted Subsidiaries of the Borrower, in each case, which Indebtedness shall (A) in the case of Indebtedness owed to a Loan Party, constitute Pledged Debt under the Security Agreement, (B) be on terms (including subordination terms, if owed by a Loan Party) acceptable to the Administrative Agent and (C) be otherwise permitted under the provisions of Section 7.03;
(d) Indebtedness under the Loan Documents;
(e) Indebtedness of the Loan Parties under the ABL Facility and any Permitted Refinancing Indebtedness in respect thereof (including Guarantees of any Guarantor in respect of such Indebtedness) not to exceed $100.0 million;
(f) Indebtedness outstanding on the date hereof and listed on Schedule 7.02 and any Permitted Refinancing Indebtedness in respect thereof;
(g) Guarantees of the Borrower or any Guarantor in respect of Indebtedness otherwise permitted hereunder of the Borrower or any Subsidiary Guarantor;
(h) Indebtedness in respect of Capital Lease Obligations, Synthetic Lease Obligations, and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(i) and Permitted Refinancing Indebtedness in respect thereof; provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $35.0 million;
(i) Permitted Holdco Debt;
(j) Indebtedness of any Person that becomes a Restricted Subsidiary of the Borrower after the date hereof in accordance with the terms of Section 7.03(h), which Indebtedness is existing at the time such Person becomes a Restricted Subsidiary of the Borrower (other than Indebtedness incurred solely in contemplation of such Persons becoming a Restricted Subsidiary of the Borrower) and Permitted Refinancing Indebtedness in respect thereof;
(k) (i) unsecured Indebtedness of any Loan Party with no scheduled payments of principal until the date that is 6 months after the Maturity Date; provided that (x) on a Pro Forma Basis, the Consolidated Leverage Ratio (calculated to exclude the net cash proceeds from Indebtedness incurred pursuant to this Section 7.02(k)) for the Measurement Period most recently ended prior to the incurrence of such Indebtedness is no greater than 4.50 to 1.00, (y) the Borrower is in compliance on a Pro Forma Basis with the covenant set forth in Section 7.15 as of the last day of the Measurement Period most recently ended prior to the incurrence of such Indebtedness[reserved] and (z) no Event of Default shall have occurred and be continuing at the time of and immediately after the incurrence of such Indebtedness and (ii) Permitted Refinancing Indebtedness in respect of Indebtedness permitted by subclause (i) above;
(l) Indebtedness of the Loan Parties in an aggregate principal amount not to exceed $35.0 million at any time outstanding;
(m) Indebtedness of Foreign Subsidiaries under the Swedish Credit Facility in an aggregate amount not to exceed the U.S. dollar equivalent (as reasonably determined by the Administrative Agent) of $65.0 million outstanding at any time; and
(n) other Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed $10.0 million outstanding at any time.
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 non-U.S. currency shall be calculated based on the relevant currency exchange rate in effect on the date such
Indebtedness was incurred; provided that, if such Indebtedness is incurred to extend, replace, refund, refinance, renew or defease other Indebtedness denominated in a foreign currency, and such extension, replacement, refunding, refinancing, renewal or defeasance 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 extension, replacement, refunding, refinancing, renewal or defeasance, 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 the principal amount of such Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased.
7.03 Investments. Make or hold any Investments, except:
(a) Investments held by the Borrower and the Restricted Subsidiaries in the form of Cash Equivalents;
(b) Investments consisting of loans and advances to officers, directors and employees of Holdings and its Restricted Subsidiaries to finance the purchase of capital stock of Holdings and for travel, entertainment, relocation and analogous ordinary business purposes, in an aggregate amount not to exceed $2.5 million at any time outstanding;
(c) (i) Investments outstanding on the Closing Date by Borrower and its Restricted Subsidiaries in their respective Subsidiaries, (ii) additional Investments by Borrower and its Restricted Subsidiaries in Restricted Subsidiaries that are Loan Parties at the time of the making of such Investment, (iii) additional Investments by Subsidiaries of the Borrower that are not Loan Parties (including Foreign Subsidiaries) in other Restricted Subsidiaries that are not Loan Parties ((including Foreign Subsidiaries), and (iv) so long as no Default or Event of Default then exists or would arise therefrom, additional Investments by the Loan Parties in Restricted Subsidiaries that are not Loan Parties in an aggregate amount when taken together with all purchases and acquisitions referred to in Section 7.03(h)(ii), during the term of this Agreement not to exceed (A) the greater of (x) $25.0 million and (y) 3% of total Consolidated assets of Borrower and its Restricted Subsidiaries as of the last day of the most recently completed Measurement Period (net of any cash return of principal or capital on any such Investment, purchases or acquisitions made pursuant to this Section 7.03(c)(iv) or Section 7.03(h)(ii) or Section 7.03(l) to Borrower or a Subsidiary Guarantor that is not applied pursuant to the parenthetical phrase in Section 7.03(h)(ii)(y) or Section 7.03(l)(x)) plus (B) an amount equal to the amount of cash distributions to the Borrower or a Subsidiary Guarantor following the Closing Date from the Foreign Subsidiaries that has not been redistributed to any Foreign Subsidiary;
(d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;
(e) Guarantees permitted by Section 7.02;
(f) Investments existing on the date hereof and set forth on Schedule 5.07(e) and any modification, replacement, renewal, reinvestment or extension of any of the foregoing that does not increase the amount thereof;
(g) Investments in Swap Contracts permitted under Section 7.02(a);
(h) the purchase or other acquisition of all of the Equity Interests in, or all or substantially all of the property, or assets comprising a business unit, of, any Person; provided that, with respect to each purchase or other acquisition made pursuant to this Section 7.03(h) (each such purchase or acquisition, a Permitted Acquisition):
(i) any such newly-created or acquired Restricted Subsidiary as a result of any such transaction shall comply with the applicable requirements of Section 6.12;
(ii) any such purchase or other acquisition that, upon the consummation thereof, does not result in the assets or property so purchased or acquired being wholly-owned directly by the Borrower or one or more Subsidiary Guarantors or, in the case of any acquisition of Equity Interests that does not result in the Person(s) so acquired becoming a Subsidiary Guarantor(s), in each case, within 10 Business Days after such purchase or acquisition shall not exceed, together with all such other purchases or other acquisitions and all Investments referred to in Section 7.03(c), the greater of (x) $25.0 million and (y) 3% of total Consolidated assets of Borrower and its Restricted Subsidiaries as of the last day of the most recently completed Measurement Period (net of any cash return of principal on capital on any acquisition, purchase or Investment made pursuant to this Section 7.03(h)(ii) or Section 7.03(c)(iv) or Section 7.03(l) to Borrower or a Subsidiary Guarantor that is not applied pursuant to the parenthetical phrase in Section 7.03(c)(iv)(y) or 7.03(l)(x));
(iii) on a Pro Forma Basis, the Borrower is in compliance with the covenant in Section 7.15 as of the last day of the most recently ended Measurement Period;[reserved];
(iv) immediately before and immediately after giving effect to any such purchase or other acquisition, no Event of Default shall have occurred and be continuing; and
(v) the Borrower shall have delivered to the Administrative Agent, on or prior to the date on which any such purchase or other acquisition is to be consummated, a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this clause (h) have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition (other than the requirements of clause (i), which will be satisfied as required by Section 6.12);
(i) Investments resulting from the issuance of Indebtedness of Holdings to the Borrower or any of the Restricted Subsidiaries in an amount not to exceed the amount necessary to permit Holdings to pay (i) so long as no Event of Default shall have occurred and be continuing at the time thereof or would result therefrom, reasonable and customary corporate and out-of-pocket operating expenses actually payable to persons that are not Affiliates relating to maintaining its ownership interest in the Borrower (including reasonable out-of-pocket expenses for legal, administrative and accounting services provided by third parties, and compensation, benefits and other amounts payable to officers and employees in connection with their employment in the ordinary course of business and to board of director observers), (ii) franchise fees or similar Taxes and fees required to maintain its corporate existence, (iii) any income Taxes imposed on Holdings or its direct or indirect parent of Holdings as the common parent of a consolidated, combined or similar Tax group of which the Borrower and/or its Restricted Subsidiaries are members, up to an amount not to exceed the amount of any such income Taxes
that the Borrower and its Restricted Subsidiaries would have been required to pay on a separate company (or a stand-alone Tax group) basis (reduced by any income Taxes paid directly by the Borrower or its Restricted Subsidiaries); provided that in determining the hypothetical income Tax liability of the Borrower and/or its Restricted Subsidiaries on a separate company (or a stand-alone Tax group) basis for the purpose of clause (iii), any interest expense on any Indebtedness incurred by Holdings shall be treated as the interest expense of the Borrower; provided further that any payments by Borrower or any of its Restricted Subsidiaries attributable to the income of any Unrestricted Subsidiary shall be permitted only to the extent that cash payments were made for such purpose by such Unrestricted Subsidiary to the Borrower or to any of its Restricted Subsidiaries and (iv) all costs or fees incurred in compliance with or in anticipation of compliance with Securities Laws and state securities Laws;
(j) promissory notes and other non-cash consideration that is permitted to be received in connection with Dispositions permitted by Section 7.05;
(k) any Investments made with the proceeds received by or contributed to the Borrower from the substantially concurrent issuance of new Equity Interests (other than Disqualified Equity Interests) issued by Holdings and not used for any other purpose permitted under this Agreement;
(l) without duplication of any other Investments permitted hereunder, other Investments by the Borrower or any of the Restricted Subsidiaries not exceeding (x) $10.0 million in any Fiscal Year (with the unused portion of such scheduled amount available for use in any succeeding Fiscal Year), net of any cash return to the Borrower and its Restricted Subsidiaries of principal or capital of any such Investment or (y) $25.0 million in the aggregate (net of any cash return of principal or capital of any Investment, purchase or acquisition made pursuant to this Section 7.03(l) or Section 7.03(c)(iv) or 7.03(h)(ii) to the Borrower or a Subsidiary Guarantor that is not applied pursuant to the parenthetical phrase in Section 7.03(c)(iv)(y) or 7.03(h)(ii));
(m) so long as no Event of Default shall have occurred and be continuing or would result from the making of any such Investment, Investments in an amount not to exceed the Available Amount;
(n) Investments to the extent that payment for such Investments is made solely with Qualified Equity Interests of Holdings (or any direct or indirect parent thereof);
(o) Investments held by a Restricted Subsidiary acquired after the Closing Date or of a Person merged into the Borrower or merged or consolidated with a Restricted Subsidiary in accordance with Section 7.04 after the Closing Date (other than existing Investments in subsidiaries of such Subsidiary or Person, which must comply with the requirements of Sections 7.02(h) or (l)) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation; and
(p) Guarantees by the Borrower or any of the Restricted Subsidiaries of leases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business.
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, except that:
(a) any Restricted Subsidiary of the Borrower may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Restricted Subsidiaries, provided that when any Loan Party is merging with another Restricted Subsidiary that is not a Loan Party, such Loan Party shall be the continuing or surviving Person;
(b) any Restricted Subsidiary (other than the Borrower) may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Loan Party (other than Holdings);
(c) any Subsidiary that is not a Loan Party (i) may dispose of all or substantially all its assets (including any Disposition that is in the nature of a liquidation) to (A) another Subsidiary that is not a Loan Party or (B) to a Loan Party (other than Holdings), or (ii) may be dissolved, with its assets (if any) being transferred in accordance with clause (i) hereof;
(d) in connection with any acquisition permitted under Section 7.03, any Restricted Subsidiary of the Borrower may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided that (i) the Person surviving such merger shall be a wholly-owned Restricted Subsidiary of the Borrower, (ii) in the case of any such merger to which any Loan Party (other than the Borrower) is a party, such Loan Party is the surviving Person and (iii) in the case of any merger involving the Borrower, the Borrower is the surviving Person;
(e) any Disposition permitted by Section 7.05 may be structured as a sale of all or substantially all of the Equity Interests of a Subsidiary;
(f) any Subsidiary which has no assets to distribute to its equity holders may be dissolved or liquidated; and
(g) any Foreign Subsidiary that is not a Material Subsidiary may be dissolved or liquidated, including through an insolvency, bankruptcy or equivalent proceeding.
7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except:
(a) Dispositions of obsolete or worn out property, or property (including Intellectual Property) that is no longer used or useful in the business of the Borrower and its Restricted Subsidiaries whether now owned or hereafter acquired, in each case, in the ordinary course of business (it being understood that this clause (a) does not include the liquidation of any Store or the inventory and other assets located therein);
(b) Dispositions of inventory and goods held for sale in the ordinary course of business;
(c) Dispositions of equipment or Real Estate to the extent that such property is exchanged for credit against all or a portion of the purchase price of similar replacement property and, if such property is Collateral, then such replacement property is made subject to Liens and security interests in favor of the Collateral Agent for the benefit of the Credit Parties;
(d) Dispositions of property by any Subsidiary to the Borrower or to a wholly-owned Restricted Subsidiary; provided that if the transferor of such property is a Subsidiary Guarantor, the transferee thereof must either be the Borrower or a Subsidiary Guarantor or an Investment permitted under Section 7.03;
(e) Dispositions permitted by Sections 7.04 (a), (b), (c), (d), (f) and (g);
(f) bulk sales or other dispositions of the inventory of the Borrower or a Restricted Subsidiary not in the ordinary course of business in connection with Store closings, at arms length, provided, that such Store closures and related Inventory dispositions shall not exceed (i) in any Fiscal Year, ten percent (10%) of the number of the Borrowers and its Restricted Subsidiaries Stores as of the beginning of such Fiscal Year (net of new Store openings in such Fiscal Year) and (ii) in the aggregate from and after the Closing Date, twenty-five percent (25%) of the number of the Borrowers and its Restricted Subsidiaries Stores in existence as of the Closing Date (net of new Store openings), provided, that all sales of Inventory in connection with Store closings in excess of ten (10) Store closings in any three month period, shall be in accordance with liquidation agreements and with professional liquidators reasonably acceptable to the Administrative Agent; provided, further that all Net Cash Proceeds received in connection therewith are applied to the Obligations if then required hereunder;
(g) grants of licenses of Intellectual Property in the ordinary course of business, which do not materially interfere with the business of the Borrower and the Restricted Subsidiaries, taken as a whole;
(h) Dispositions by the Borrower and the Restricted Subsidiaries not otherwise permitted under this Section 7.05; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition, (ii) the aggregate book value of all property Disposed of in reliance on this clause (h) in any Fiscal Year of Borrower shall not exceed $10.0 million; provided that an additional aggregate book value of not more than $5.0 million per year of property held by Foreign Subsidiaries may be Disposed of in reliance on this clause (h) and (iii) at least 75% of the purchase price for such asset shall be paid to the Borrower or such Restricted Subsidiary in cash (with an assumption of Indebtedness (other than Subordinated Indebtedness) of the Borrower or such Restricted Subsidiary by a purchaser in connection with the applicable Disposition shall be deemed to be cash for the purposes of this clause (iii));
(i) Licenses for the conduct of licensed departments (other than to an Affiliate of any Loan Party) within any Store in the ordinary course of business; and
(j) any issuance or sale of Equity Interests in, or sale of Indebtedness or other securities of, an Unrestricted Subsidiary;
provided, however, that any Disposition pursuant to clauses (a) though (d), and clauses (f) and (h) shall be for fair market value.
7.06 Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, except that:
(a) each Restricted Subsidiary of the Borrower may make Restricted Payments to any other Loan Party (other than Holdings) and any other Person that owns a direct Equity Interest (other than Disqualified Equity Interests) in such Restricted Subsidiary, ratably
according to their respective holdings of the type of Equity Interests in respect of which such Restricted Payment is being made;
(b) Borrower and each of its Restricted Subsidiaries may declare and make dividend payments or other distributions payable solely in the common or preferred stock or other common or preferred Equity Interests of such Person (other than Disqualified Equity Interests); provided that such Equity Interests shall be pledged to the Collateral Agent to the extent required by Section 6.12 hereof;
(c) Borrower may declare and pay cash dividends to Holdings in an amount not to exceed an amount necessary to permit Holdings to pay (i) reasonable and customary corporate and operating expenses relating to maintaining its ownership interest in the Borrower (including reasonable out-of-pocket expenses for legal, administrative and accounting services provided by third parties, and compensation, benefits and other amounts payable to officers and employees in connection with their employment in the ordinary course of business and to board of director observers), (ii) franchise Taxes and similar fees required to maintain its corporate existence, (iii) any income Taxes imposed on Holdings or its direct or indirect parent of Holdings as the common parent of a consolidated, combined or similar Tax group of which the Borrower and/or its Restricted Subsidiaries are members, up to an amount not to exceed the amount of any such income Taxes that the Borrower and its Restricted Subsidiaries would have been required to pay on a separate company (or a stand-alone Tax group) basis (reduced by any income Taxes paid directly by the Borrower or its Restricted Subsidiaries); provided that in determining the hypothetical income Tax liability of the Borrower and/or its Restricted Subsidiaries on a separate company (or a stand-alone Tax group) basis for the purpose of clause (iii), any interest expense on any Indebtedness incurred by Holdings shall be treated as the interest expense of the Borrower and any dividends by Borrower attributable to the income of any Unrestricted Subsidiary shall be permitted only to the extent that cash payments were made for such purpose by such Unrestricted Subsidiary to the Borrower or any of its Restricted Subsidiaries and (iv) all costs or fees incurred in compliance with or in anticipation of compliance with Securities Laws and state securities Laws;
(d) Borrower may (or make Restricted Payments to allow Holdings or any direct or indirect parent thereof to) repurchase, redeem or otherwise acquire or retire shares of its capital stock held by officers, directors or employees of Holdings or any Restricted Subsidiary (or their estates or trusts) following the death, disability or termination of employment of any such Person and, so long as no Default shall have occurred and be continuing (or would result therefrom), the Borrower may pay dividends to Holdings to permit such repurchase, redemption, retirement or acquisition; provided that the aggregate amount of payments to Holdings by the Borrower under this clause (d) will not exceed $2.5 million in any Fiscal Year of the Borrower (with any unused portion of such scheduled amount available for use in any succeeding Fiscal Year);
(e) so long as no Event of Default shall have occurred and be continuing or would result therefrom, Borrower and each of its Restricted Subsidiaries may make other Restricted Payments at any time in an amount not to exceed the sum of (i) $10.0 million in the aggregate during the term of this Agreement and (ii) if, after giving effect to such Restricted Payment on a Pro Forma Basis, the Consolidated Leverage Ratio as of the last day of the most recently ended Measurement Period would be no greater than 2.00:1.00, the Available Amount at such time (for the purposes of clarity, the Available Amount under this clause (ii) cannot be used to make Restricted Payments (or payments to Holdings in order for Holdings to make) in order to make cash dividend payments on Holdings preferred stock);
(f) Investments permitted by Section 7.03;
(g) repurchases of Equity Interests in Holdings, the Borrower or any of the Restricted Subsidiaries deemed to occur upon exercise of stock options or warrants or similar rights to the extent such Equity Interests represent a portion of the exercise price of such options or warrants or similar rights;
(h) the Borrower may make Restricted Payments to Holdings or to any direct or indirect parent of Holdings (and Holdings may make Restricted Payments to any direct or indirect parent of Holdings) the proceeds of which shall be used to make payments permitted under Sections 7.08(d), (e) and (h) (but only to the extent such payments have not been and are not expected to be made by the Borrower or a Restricted Subsidiary);
(i) the declaration and payment of dividends on the Borrowers common stock following the first public offering of the Borrowers common stock or the common stock of any of its direct or indirect parents after the Closing Date, of up to 6.0% per annum of the net 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
(j) the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration (i) such payment would have complied with the provisions of clause (i) and (ii) no Event of Default occurred and was continuing; and
(k) the Special Distribution;
provided, for purposes of calculating the amount available to make Restricted Payments, any dividend or distribution paid in reliance on clause (j) shall be deemed to be a Restricted Payment on the date of declaration and not on the date of payment.
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 date hereof or any business reasonably related or ancillary thereto.
7.08 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Loan Parties (or any Unrestricted Subsidiary, whether or not an Affiliate of any Loan Party), whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Loan Parties or such Restricted Subsidiary as would be obtainable by the Loan Parties or such Restricted Subsidiary at the time in a comparable arms length transaction with a Person other than an Affiliate; provided that the foregoing restriction shall not apply to:
(a) transactions among (i) the Loan Parties, (ii) any Restricted Subsidiaries of Holdings that are not Loan Parties or (iii) the Loan Parties, on the one hand, and any Restricted Subsidiary that is not a Loan Party, on the other hand, that are at least as favorable to the Loan Parties as could be obtained in an arms-length transaction from an unaffiliated party;
(b) (i) any Indebtedness permitted by Section 7.02(c); (ii) any Investments permitted by Section 7.03 (other than Investments in any Equity Investor or a portfolio company owned or controlled by an Equity Investor (other than any Loan Party)); and (iii) any Restricted Payment permitted by Section 7.06;
(c) so long as no Event of Default has occurred and is continuing or would result therefrom, the payment of (i) Management Fees, provided that fees and other amounts paid under the Management Agreement (other than expense reimbursements) shall not exceed $2.5 million in any Fiscal Year plus the amount of such annual limit not paid in the previous Fiscal Year, and (ii) Transaction Expenses;
(d) employment, consulting (exclusive of the Management Agreement) and severance agreements;
(e) loans and advances permitted by Section 7.03(b);
(f) payment of directors fees, expenses and indemnities;
(g) incurrence of Subordinated Indebtedness by the Loan Parties to the Equity Investors otherwise permitted hereunder or the issuance of Equity Interests by Holdings to the Equity Investors, provided that no such Equity Interests may constitute Disqualified Equity Interests;
(h) transactions with joint ventures permitted hereunder for the purchase or sale of goods and services entered into in the ordinary course of business on terms no less favorable to the Loan Parties or such Restricted Subsidiary as would be obtainable by the Loan Parties or such Restricted Subsidiary at the time in a comparable arms length transaction;
(i) customary payments by the Borrower and any of its Restricted Subsidiaries to the Sponsor made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with acquisitions or divestitures), which payments are approved by a majority of the disinterested members of the board of directors of Holdings in good faith;
(j) transactions in which the Borrower or any of the Restricted Subsidiaries, as the case may be, delivers to the Administrative Agent a letter from an Independent Financial Advisor stating that such transaction is fair to the Borrower or such Restricted Subsidiary from a financial point of view;
(k) investments by the Sponsor or the Equity Investors in securities of Holdings, the Borrower or any of the Restricted Subsidiaries 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; and
(l) Restricted Payments permitted by Section 7.06.
7.09 Burdensome Agreements. Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Restricted Subsidiary of Borrower to make Restricted Payments to any Loan Party or to otherwise transfer property to or invest in any Loan Party, except for any agreement in effect (A) on the date hereof and set forth on Schedule 7.09 and any modification, replacement, renewal, reinvestment or extension of any of the foregoing or (B) at the time any Person becomes a Restricted Subsidiary of Borrower, so long as such agreement was not entered into solely in contemplation of such Person becoming a Restricted Subsidiary of Borrower, (ii) of any Restricted Subsidiary of Borrower to Guarantee the Indebtedness of the Borrower, (iii) of any Restricted Subsidiary of Borrower to make or repay loans to a Loan Party or
(iv) of the Borrower or any Restricted Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; provided, however, that this clause (iv) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.02 solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person. The foregoing restrictions shall not be violated by reason of (i) applicable Laws, (ii) this Agreement and the other Loan Documents, (iii) (A) the ABL Loan Documents so long as the restrictions of the kind referred to in the previous sentence contained therein, taken as a whole, are not materially more restrictive than those contained in the ABL Loan Documents (as in effect on the Closing Date), (B) the Swedish Credit Facility, or (C) documents governing Permitted Holdco Debt so long as the restrictions of the kind referred to in the previous sentence contained therein, taken as a whole, are no more restrictive than those contained herein, (iv) customary non-assignment provisions of any contract, lease or license of the Borrower or any Restricted Subsidiary of the Borrower, (v) customary restrictions on a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Equity Interests or assets of a Subsidiary pending the closing of such sale or disposition, (vi) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures entered into in the ordinary course of business, (vii) documents that represent Indebtedness of a Restricted Subsidiary that is not a Loan Party that is permitted by Section 7.03 to the extent such restriction applies only to such Restricted Subsidiary, (viii) documents that 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 its obligation or ability to make any payments or grant any Liens required hereunder or (vii) any restrictions under any agreement that amends, refinances or replaces any agreement containing restrictions permitted under the preceding clauses provided that the terms and conditions are no less favorable taken as a whole to the Restricted Subsidiary.
7.10 Amendments of Material Indebtedness. Amend, modify or waive any of the Loan Partys rights under any Material Indebtedness (other than on account of any refinancing thereof otherwise permitted hereunder), in each case, to the extent that such amendment, modification or waiver would reasonably be likely to have a Material Adverse Effect.
7.11 Accounting Changes. Make any change in their Fiscal Year; provided, however, that Holdings and the Borrower may, upon written notice to the Administrative Agent, change its fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, Holdings, 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.
7.12 Prepayments, Etc. of Indebtedness. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Subordinated Indebtedness, or make any payment in violation of any subordination terms of any Subordinated Indebtedness, except (a) regularly scheduled or mandatory repayments or redemptions of Subordinated Indebtedness, (b) voluntary prepayments of Subordinated Indebtedness as long as no Default or Event of Default then exists or would arise as a result of entering into such transaction or the making such payment, (c) refinancings and refundings of such Indebtedness in compliance with Section 7.02(b) or Section 7.02(e), as applicable, and (d) so long as no Event of Default shall have occurred and be continuing or would result therefrom, prepayments, redemptions, purchases, defeasances or other satisfactions of Subordinated Indebtedness from the Available Amount at such time if, after giving effect to such prepayments, redemptions, purchases, defeasances or other satisfactions on a Pro Forma Basis, the
Consolidated Leverage Ratio as of the last day of the most recently ended Measurement Period would be no greater than 2.00:1.00.
7.13 Holding Company. In the case of Holdings, engage in any business or activity other than (a) the ownership of all outstanding Equity Interests in the Borrower, (b) maintaining its corporate existence, (c) participating in Tax, accounting and other administrative activities as the parent of the Consolidated group of companies, including the Loan Parties, (d) the execution and delivery of the Loan Documents, the ABL Loan Documents, agreements governing other Indebtedness of the Borrower and its Subsidiaries not otherwise prohibited hereunder and agreements governing Permitted Holdco Debt, in each case, to which it is a party and the performance of its obligations thereunder, (e) any public offering of its common stock or any other issuance of its Equity Interests or any transaction permitted under Section 7.04, (f) holding any cash or property received in connection with Restricted Payments made by the Borrower in accordance with Section 7.06 pending application thereof by Holdings, (g) providing indemnification to officers and directors and (h) activities incidental to the businesses or activities described in clauses (a) through (g) of this Section.
7.14 Sale and Leaseback Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred, provided that Borrower and its Restricted Subsidiaries may become and remain liable as lessee, guarantor or other surety with respect to any such lease if and to the extent that the Borrower or any of its Restricted Subsidiaries would be permitted to enter into, and remain liable under, such lease to the extent that the transaction would be permitted under Section 7.02, assuming the sale and lease back transaction constituted Indebtedness in a principal amount equal to the gross proceeds of the sale and the related sale were permitted under Section 7.05(h).
7.15 Senior Secured Leverage Ratio. Permit the Senior Secured Leverage Ratio as of the last day of any Fiscal Quarter of Borrower during any fiscal period of Borrower listed below to be greater than the ratio set forth opposite such period:
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ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
8.01 Events of Default. Any of the following shall constitute an Event of Default:
(a) Non-Payment. The Borrower or any other Loan Party fails to (i) pay when and as required to be paid herein, any amount of principal of any Loan, or (ii) pay within three Business Days after the same becomes due, any interest on any Loan, or any fee due hereunder, or (iii) pay within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or
(b) Specific Covenants. Any Loan Party or any of its Restricted Subsidiaries fails to perform or observe any term, covenant or agreement applicable to it contained in any of Section 6.03(a), 6.05(a) (solely as it relates to the Borrower), 6.11, 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 30 days following receipt of notice from the Administrative Agent or the Required Lenders; or
(d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or
(e) Cross-Default. (i) Any Loan Party or any Restricted Subsidiary thereof (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $10.0 million, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; provided that (x) this paragraph (e) (B) shall not apply to 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) the occurrence of an event of default under the ABL Facility (other than a payment event of default) shall not constitute an Event of Default under this clause (e)(B) until the earliest of (x) 30 days after the date of such event of default (during which period such event of default is not waived or cured), (y) the acceleration of the obligations under the ABL Facility or (z) the exercise of secured creditor remedies by the administrative agent under the ABL Facility and/or lenders under the ABL Facility as a result of such event of default; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which a Loan Party or any Restricted Subsidiary thereof is the
Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which a Loan Party or any Restricted Subsidiary thereof is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by such Loan Party or such Restricted Subsidiary as a result thereof is greater than $10.0 million; or
(f) Insolvency Proceedings, Etc. Any Loan Party or any 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 or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 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 60 calendar days, or an order for relief is entered in any such proceeding; or
(g) Inability to Pay Debts; Attachment. (i) Any Loan Party or any Material Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or
(h) Judgments. There is entered against any Loan Party or any Material Subsidiary and remains unpaid one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $10.0 million (to the extent not covered by independent third-party insurance as to which the insurer is rated at least A by A.M. Best Company, has been notified of the potential claim and does not dispute coverage) and (i) enforcement proceedings are commenced by any creditor upon such judgment or order, or (ii) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or
(i) ERISA. An ERISA Event occurs or any substantially similar event occurs with respect to a Foreign Plan (that would have been an ERISA Event had the Foreign Plan been subject to ERISA and that gives rise to liability under analogous foreign law) which, together with all other ERISA Events (or such substantially similar events with respect to Foreign Plans) that have occurred, has resulted or could reasonably be expected to result in a Material Adverse Effect; or
(j) 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 or satisfaction in full of all the Obligations, ceases to be in full force and effect against Holdings, the Borrower or any Material Subsidiary; or any Loan Party contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Collateral Document; or
(k) Change of Control. There occurs any Change of Control; or
(l) Collateral Documents. Any Collateral Document after delivery thereof pursuant to Article IV, Section 6.12, or Section 6.18 shall for any reason (other than pursuant to the terms thereof) cease (or shall be asserted by any Loan Party or, in the reasonable discretion of the Administrative Agent, any other Person not) to create a valid and perfected First Priority Lien or Second Priority Lien, as applicable (subject to Liens permitted by Section 7.01), on the Collateral purported to be covered thereby with an aggregate fair market value for such Collateral of $10.0 million or more, for any reason other than the failure of Collateral Agent to maintain control over any Collateral in its possession.
8.02 Remedies upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent may (and at the request of, or with the consent of, the Required Lenders, shall) take any or all of the following actions:
(a) declare the commitment of each Lender to make Loans to be terminated, whereupon such commitments and obligation shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Loan Parties; and
(c) whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, proceed to protect, enforce and exercise all rights and remedies under this Agreement, any of the other Loan Documents or applicable Law, including, but not limited to, by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties;
provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans 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.
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), or after the commencement of any Liquidation, subject to the terms of the Intercreditor Agreement, any amounts received on account of the Obligations shall be applied (by the Administrative Agent as hereby instructed so to apply) in the following order:
First, to payment in full of that portion of the Obligations constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and the Collateral Agent and amounts payable under Article III) payable to the Administrative Agent and the Collateral Agent, each in its capacity as such;
Second, to payment in full of all other Obligations ratably among the parties holding such Obligations in proportion to the amounts described in this clause Second payable to them in their capacities as such;
Last, the balance, if any, after all of the Obligations have been paid in full, to the applicable Loan Parties or as otherwise required by Law.
Notwithstanding the foregoing, (a) amounts received from the Borrower or any Guarantor that is not a Qualified ECP Guarantor shall not be applied to the Obligations that are Excluded Swap Obligations (it being understood, that in the event that any amount is applied to Obligations other than Excluded Swap Obligations as a result of this this clause (a), the Administrative Agent shall, to the extent permitted by law, make such adjustments as it determines are appropriate to distributions pursuant to clause Second above from amounts received from Qualified ECP Guarantors to ensure, as nearly as possible, that the proportional aggregate recoveries with respect to Obligations described in clause Second above by the holders of any Excluded Swap Obligations are the same as the proportional aggregate recoveries with respect to other Obligations pursuant to clause Second above) and (b) Obligations arising under Cash Management Services and Bank Products shall be excluded from the application described above if the Administrative Agent has not received written notice thereof, together with such supporting documentation as the Administrative Agent may request, from the applicable provider of Cash Management Services or Bank Products, as the case may be. Each provider of Cash Management Services or Bank Products not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of Article IX hereof for itself and its Affiliates as if a Lender party hereto.
ARTICLE IX
ADMINISTRATIVE AGENT
9.01 Appointment and Authority.
(a) Each of the Lenders hereby irrevocably appoints JPMorgan 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 are solely for the benefit of the Administrative Agent and the Lenders, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.
(b) The Administrative Agent shall also act as the Collateral Agent under the Loan Documents, and each of the Lenders (in its capacities as a Lender) hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent and any co-agents, sub-agents and attorneys-in-fact appointed by the Collateral Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Agents, shall be entitled to the benefits of all provisions of this Article IX and Article XI (including Section 11.04(c), as though such co-agents, sub-agents and attorneys-in-fact were the Collateral Agent under the Loan Documents) as if set forth in full herein with respect thereto.
9.02 Rights as a Lender. The Person serving as the Administrative Agent and Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent or the Collateral Agent and the term Lender or Lenders shall, unless otherwise expressly indicated or unless the context
otherwise requires, include the Person serving as the Administrative Agent and Collateral 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 the Administrative Agent or the Collateral Agent hereunder and without any duty to account therefor to the Lenders.
9.03 Exculpatory Provisions. The Agents shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Agents:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent or Collateral Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent and the Collateral Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent or the Collateral Agent to liability or that is contrary to any Loan Document or applicable 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 its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or the Collateral Agent or any of its Affiliates in any capacity.
The Agents shall not be liable for any action taken or not taken by them (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 Agents shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.01 and 8.02) or (ii) in the absence of their own gross negligence or willful misconduct. The Agents 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.
The Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Collateral Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents.
9.04 Reliance by Agents. The Agents 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 them to be genuine and to have been signed, sent or otherwise authenticated by
the proper Person. The Agents also may rely upon any statement made to them orally or by telephone and believed by them to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan 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 Agents may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by them, and shall not be liable for any action taken or not taken by them in accordance with the advice of any such counsel, accountants or experts.
9.05 Delegation of Duties. The Agents may perform in any and all of their duties and exercise their rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent or the Collateral Agent, as applicable. The Agents and any such sub-agent may perform any and all of their duties and exercise their rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article IX shall apply to any such sub-agent and to the Related Parties of the Agents and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facility provided for herein as well as activities as Administrative Agent or Collateral Agent.
9.06 Resignation of Agents. The Agents may at any time give notice of its resignation to the Lenders and the Borrower, including the effective date of such resignation which may be not less than 30 days from the date of such notice. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower at all times other than during the existence of an Event of Default (which consent shall not be unreasonably withheld or delayed), to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agents give notice of their resignation, then the retiring Agents may on behalf of the Lenders, appoint a successor Administrative Agent and Collateral Agent meeting the qualifications set forth above; provided that if the Agents shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (a) the retiring Agents shall be discharged from their duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Collateral Agent on behalf of the Lenders under any of the Loan Documents, the retiring Collateral Agent shall continue to hold such collateral security until such time as a successor Collateral Agent is appointed) and (b) 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 9.06. Upon the acceptance of a successors appointment as Administrative Agent and Collateral Agent hereunder, 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 Collateral Agent, and the retiring Administrative Agent and Collateral Agent shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section 9.06). 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 or Collateral Agents resignation hereunder and under the other Loan Documents, the provisions of this Article IX and Section 11.04 shall continue in effect for the benefit of such retiring Administrative Agent and Collateral Agent, their respective sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent and Collateral Agent was acting as Administrative Agent and Collateral Agent.
9.07 Non-Reliance on Agents and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Agents, the Arrangers, the Co-Documentation Agents or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agents, the Arrangers, the Co-Documentation Agents or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. The Agents, the Arrangers and the Co-Documentation Agents shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of any Loan Party that may come into the possession of the Agents, the Arrangers and the Co-Documentation Agents.
9.08 No Other Duties, Etc.Anything herein to the contrary notwithstanding, none of the Arrangers or Co-Documentation Agents listed on the cover page hereof shall have (i) any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, the Collateral Agent or a Lender hereunder or (ii) any fiduciary relationship with the Lenders, Borrower or any other Person pursuant to the Loan Documents.
9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan 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 11.04) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, if 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 Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.07 and 11.04.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
9.10 Collateral and Guaranty Matters. The Lenders irrevocably authorize the Agents, at their option and in their discretion,
(a) to release any Lien on any property granted to or held by the Collateral Agent under any Loan Document (i) upon termination of the Aggregate Commitments and Additional Term B Commitment and payment in full of all Obligations (other than (A) contingent indemnification obligations for which no claim has then been asserted, (B) obligations and liabilities under Cash Management Services and (C) obligations and liabilities under Bank Products), (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document to a Person that is not a Loan Party, or (iii) if approved, authorized or ratified in writing in accordance with Section 11.01;
(b) to release any Guarantor from its obligations hereunder if such Person ceases to be a Restricted Subsidiary as a result of a transaction permitted hereunder; and
(c) to subordinate any Lien on any property granted to or held by the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(i).
Upon request by the Agents at any time, the Required Lenders will confirm in writing the Agents authority to release or subordinate their interest in particular types or items of property, or to release any Guarantor from its obligations hereunder pursuant to this Section 9.10. In each case as specified in this Section 9.10, the Administrative Agent or the Collateral Agent, as applicable, will, at the Borrowers expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations hereunder, in each case in accordance with the terms of the Loan Documents and this Section 9.10.
9.11 Notice of Transfer. The Agents may deem and treat a Lender party to this Agreement as the owner of such Lenders portion of the Obligations for all purposes, unless and until, and except to the extent, an Assignment and Assumption shall have become effective as set forth in Section 11.06.
9.12 Agency for Perfection. Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Liens for the benefit of the Agents and the Lenders, in assets which, in accordance with Article 9 of the UCC or any other applicable Law can be perfected only by possession. Should any Lender (other than the Agents) obtain possession of any such Collateral, such Lender shall notify the Agents 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.
9.13 Indemnification of Agents. The Lenders agree to indemnify the Agents (to the extent not reimbursed by the Loan Parties and without limiting the obligations of Loan Parties hereunder), ratably according to their respective principal amount of Loans held (or, if the Loans have been repaid, according to their respective principal amount of Loans held immediately prior to such repayment), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by any Agent in connection therewith; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agents gross negligence or willful misconduct as determined by a final and nonappealable judgment of a court of competent jurisdiction.
9.14 Withholding Tax. To the extent required by any applicable law, the Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any other authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold Tax from amounts paid to or for the account of any 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 Agent of a change in circumstance that rendered the exemption from, or reduction of withholding Tax ineffective), such Lender shall indemnify and hold harmless the Agent (to the extent that the Agent has not already been reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) for all amounts paid, directly or indirectly, by the Agent as Tax or otherwise, including any interest, additions to Tax or penalties thereto, together with all expenses incurred, including legal expenses and any other out-of-pocket expenses, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.
9.15 Relation Among Lenders. The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agents) authorized to act for, any other Lender.
ARTICLE X
CONTINUING GUARANTY
10.01 Guaranty. Each Guarantor hereby absolutely and unconditionally guarantees, as a guaranty of payment and performance and not merely as a guaranty of collection, prompt payment when due, whether at stated maturity, by required prepayment, upon acceleration, demand or otherwise, and at all times thereafter, of any and all of the Obligations, whether for principal, interest, premiums, fees, indemnities, damages, costs, expenses or otherwise, of the Borrower to the Credit Parties, arising hereunder and under the other Loan Documents (including all renewals, extensions, amendments, refinancings and other modifications thereof and all costs, attorneys fees and expenses incurred by the Credit Parties in connection with the collection or enforcement thereof). The Administrative Agents books and records showing the amount of the Obligations shall be admissible in evidence in any action or proceeding, and shall be binding upon each Guarantor, and conclusive for the purpose of establishing the amount of the Obligations. This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any instrument or agreement evidencing any Obligations, or by the existence, validity, enforceability, perfection, non-perfection or extent of any collateral therefor, or by any fact or circumstance relating to the Obligations which might otherwise constitute a defense to the obligations of any Guarantor under this Guaranty, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to any or all of the foregoing.
Each Qualified ECP Guarantor (including the Borrower) hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of each such Loan Partys obligations (a) in respect of Swap Contracts to which it is a party and (b) under this Guaranty in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 10.01 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 10.01, or otherwise under this Guaranty, as it
relates to such other Loan Party, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the termination of this Guaranty in accordance with Section 10.06 hereof. Each Qualified ECP Guarantor intends that this Section 10.01 constitute, and this Section 10.01 shall be deemed to constitute, a keepwell, support, or other agreement for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
10.02 Rights of Lenders. Each Guarantor consents and agrees that the Credit Parties may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness hereof: (a) amend, extend, renew, compromise, discharge, accelerate or otherwise change the time for payment or the terms of the Obligations or any part thereof; (b) take, hold, exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any security for the payment of this Guaranty or any Obligations; (c) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Lenders in their sole discretion may determine; and (d) release or substitute one or more of any endorsers or other guarantors of any of the Obligations. Without limiting the generality of the foregoing, each Guarantor consents to the taking of, or failure to take, any action which might in any manner or to any extent vary the risks of such Guarantor under this Guaranty or which, but for this provision, might operate as a discharge of such Guarantor.
10.03 Certain Waivers. Each Guarantor waives (a) any defense arising by reason of any disability or other defense of the Borrower or any other Guarantor, or the cessation from any cause whatsoever (including any act or omission of any Credit Party) of the liability of the Borrower; (b) any defense based on any claim that such Guarantors obligations exceed or are more burdensome than those of the Borrower; (c) the benefit of any statute of limitations affecting such Guarantors liability hereunder; (d) any right to proceed against the Borrower, proceed against or exhaust any security for the Obligations, or pursue any other remedy in the power of any Credit Party whatsoever; (e) any benefit of and any right to participate in any security now or hereafter held by any Credit Party; and (f) to the fullest extent permitted by law, any and all other defenses or benefits that may be derived from or afforded by applicable law limiting the liability of or exonerating guarantors or sureties. Each Guarantor expressly waives all setoffs and counterclaims and all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Obligations, and all notices of acceptance of this Guaranty or of the existence, creation or incurrence of new or additional Obligations. As provided below, this Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York.
10.04 Obligations Independent. The obligations of each Guarantor hereunder re those of primary obligor, and not merely as surety, and are independent of the Obligations and the obligations of any other guarantor, and a separate action may be brought against each Guarantor to enforce this Guaranty whether or not the Borrower or any other person or entity is joined as a party.
10.05 Subrogation. No Guarantor shall exercise any right of subrogation, contribution, indemnity, reimbursement or similar rights with respect to any payments it makes under this Guaranty until all of the Obligations (other than any indemnity obligations for unasserted claims that by its terms survives the termination of this Agreement) and any amounts payable under this Guaranty have been paid and performed in full and the Commitments and the facility are terminated. If any amounts are paid to any Guarantor in violation of the foregoing limitation, then such amounts shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Credit Parties to reduce the amount of the Obligations, whether matured or unmatured.
10.06 Termination; Reinstatement. This Guaranty is a continuing and irrevocable guaranty of all Obligations now or hereafter existing and shall remain in full force and effect until all Obligations and any other amounts payable under this Guaranty are paid in full in cash (other than any indemnity obligations for unasserted claims that by its terms survives the termination of this Agreement) and the Commitments and the facility with respect to the Obligations are terminated. Notwithstanding the foregoing, this Guaranty shall continue in full force and effect or be revived, as the case may be, if any payment by or on behalf of the Borrower or any Guarantor is made, or any of the Credit Parties exercises its right of setoff, in respect of the Obligations 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 any of the Credit Parties in their discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Laws or otherwise, all as if such payment had not been made or such setoff had not occurred and whether or not the Credit Parties are in possession of or have released this Guaranty and regardless of any prior revocation, rescission, termination or reduction. The obligations of each Guarantor under this paragraph shall survive termination of this Guaranty.
10.07 Subordination. Each Guarantor hereby subordinates the payment of all obligations and indebtedness of the Borrower owing to such Guarantor, whether now existing or hereafter arising, including but not limited to any obligation of the Borrower to any Guarantor as subrogee of the Credit Parties or resulting from such Guarantors performance under this Guaranty, to the indefeasible payment in full in cash of all Obligations (other than any indemnity obligations for unasserted claims that by its terms survives the termination of this Agreement). If the Credit Parties so request, any such obligation or indebtedness of the Borrower to any Guarantor shall be enforced and performance received by such Guarantor as trustee for the Credit Parties and the proceeds thereof shall be paid over to the Credit Parties on account of the Obligations, but without reducing or affecting in any manner the liability of such Guarantor under this Guaranty.
10.08 Stay of Acceleration. If acceleration of the time for payment of any of the Obligations is stayed, in connection with any case commenced by or against any Guarantor or the Borrower under any Debtor Relief Laws, or otherwise, all such amounts shall nonetheless be payable by such Guarantor immediately upon demand by the Credit Parties.
10.09 Condition of Borrower. Each Guarantor acknowledges and agrees that it has the sole responsibility for, and has adequate means of, obtaining from the Borrower and any other guarantor such information concerning the financial condition, business and operations of the Borrower and any such other Guarantor as such Guarantor requires, and that none of the Credit Parties has any duty, and such Guarantor is not relying on the Credit Parties at any time to disclose to such Guarantor any information relating to the business, operations or financial condition of the Borrower or any other Guarantor (such Guarantor waiving any duty on the part of the Credit Parties to disclose such information and any defense relating to the failure to provide the same).
ARTICLE XI
MISCELLANEOUS
11.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:
(a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender (it being understood that the waiver of any mandatory prepayment shall not constitute an extension or increase of any Commitment of any Lender);
(b) postpone any date fixed by this Agreement, any Additional Credit Extension Amendment or any other Loan Document for any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any of the other Loan Documents without the written consent of each Lender entitled to such payment (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);
(c) reduce the principal of, or the rate of interest specified herein on, any Loan, or any fees or other amounts payable hereunder or under any other Loan Document, without the written consent of each Lender entitled to such amount; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of Default Rate or to waive any obligation of the Borrower to pay interest at the Default Rate;
(d) change Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;
(e) change any provision of this Section 11.01 or the definition of Required Lenders or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;
(f) except as expressly permitted hereunder, release all or substantially all of the Guarantors from their obligations under the Loan Documents without the written consent of each Lender; or
(g) except for releases of Collateral in accordance with the provisions of Section 9.10 hereof (in which case, such release may be made by the Administrative Agent acting alone), release all or substantially all of the Collateral from the Liens of the Collateral Documents in any transaction or series of related transactions, without the written consent of each Lender;
and provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent or the Collateral Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent or the Collateral Agent, as applicable, under this Agreement or any other Loan Document. Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except an amendment under clause (a), (b) or (c) above that directly affects the rights and obligations of such Lender.
This Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and Loan Parties (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 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.
In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Loans Parties and the Lenders providing the Replacement Loans (as defined below) to permit the refinancing of all outstanding Loans of any Class (Refinanced Loans) with replacement 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, (b) the Yield with respect to such Replacement Loans shall not be higher than the 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 final maturity date of all Loans in effect immediately prior to such refinancing.
If any Lender does not consent to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of each Lender, and that has been approved by the Required Lenders, the Borrower may replace such non-consenting Lender in accordance with Section 11.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Borrower to be made pursuant to this paragraph).
Notwithstanding anything to the contrary herein contained, no provider of any Bank Product or Cash Management Service in its capacity as such (a) shall have any right to consent to any amendment, modification, termination or waiver of this Agreement or any other Loan Document (including any amendment and/or restatement of this Agreement and the other Loan Documents refinancing, replacing or restructuring the Loans and the Obligations including any increase thereof) or to contest any such amendment, modification, termination or waiver, (b) shall be deemed a Lender for any purposes of the Loan Documents, or (c) shall have any right to (i) enforce any security interest, right or remedy under any of the Loan Documents or (ii) instruct the Agents with respect to any action or inaction by the Agents with respect to the exercise of any rights or remedies under the Loan Documents or at law or equity, or consent to or contest any such action or inaction. Except for the payment of amounts on account of Bank Products and Cash Management Services (but only to the extent the Agents shall have received sufficient funds therefor), the Agents shall have no duties or obligations to any provider of any Bank Product or Cash Management Services in its capacity as such. The provisions of this paragraph shall survive the assignment by any Lender of its Loans and Commitments.
Notwithstanding anything to the contrary contained in this Section 11.01, 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 any Loan Document, then the Administrative Agent and/or the Collateral Agent (acting in their 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.
In addition, notwithstanding the foregoing, this Agreement and the other Loan Documents may be amended with the written consent of the Administrative Agent, the Borrower and the Lenders providing the Replacement Loans to permit the refinancing of all outstanding Loans of any Class.
11.02 Notices; Effectiveness; Electronic Communications.
(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(i) if to Holdings, the Borrower, any Loan Party, the Administrative Agent or the Collateral Agent to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 11.02; and
(ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier 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 delivered through electronic communications to the extent provided in subsection (b) below shall be effective as provided in such subsection (b).
(b) Electronic Communications. Notices and other communications to the Lenders 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 has notified the Administrative Agent that it is incapable of receiving notices under such Article 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.
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.
(c) The Platform. THE PLATFORM IS PROVIDED AS IS AND AS AVAILABLE. THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN
CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the Agent Parties) have any liability to Holdings or any of its Subsidiaries, 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 Borrowers 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 nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to Holdings or any of its Subsidiaries, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(d) Change of Address, Etc. Each of Holdings, the Borrower, any other Loan Party, and the Administrative Agent may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower and the 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, telecopier 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.
(e) Reliance by Administrative Agent, the Collateral Agent and Lenders. The Administrative Agent, the Collateral Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Conversion/Continuation 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, the Collateral Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the 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.
11.03 No Waiver; Cumulative Remedies. No failure by any Lender, the Administrative Agent or the Collateral Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder 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.
11.04 Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Loan Parties shall pay all Credit Party Expenses within ten (10) Business Days after receipt of an invoice therefor.
(b) Indemnification by the Loan Parties. The Loan Parties shall indemnify the Administrative Agent (and any sub-agent thereof), the Collateral Agent, the Arrangers, the Co-Documentation Agents, the joint bookrunning managers, each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable and documented in reasonable detail fees, charges and disbursements 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 material to the interests of the Lenders, in each case, selected by the Administrative Agent and solely in the case of an actual conflict of interest between Indemnitees where the Indemnitees affected by such conflict inform the Borrower of such conflict, one additional counsel in each relevant jurisdiction material to the interest of the Lenders to each group of affected Indemnitees taken as a whole) incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the preparation, execution, delivery or administration of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby or any amendment or waiver with respect hereto or thereto, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or letter of credit or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or Release or threat of Release of Hazardous Materials, at, under, on or from any property or facility currently or formerly owned, leased or operated by Holdings or any of its Subsidiaries, or any Environmental Liability related in any way to Holdings or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitees obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction, or (z) result from the presence, Release or threat of Release of Hazardous Materials or violations of Environmental Laws first occurring or first existing after completion of the foreclosure upon the Collateral, granting of a deed-in-lieu of foreclosure with respect to the Collateral or similar transfer of title or possession of the Collateral, unless such presence, release or violation is actually caused by any Loan Party or any Subsidiary thereof. This Section 11.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims or damages arising from any non-Tax claim.
(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to pay any amount required under subsection (a) or (b) of this Section 11.04 to be paid by it to the Agents (or any sub-agent thereof), or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), the Collateral Agent, or such Related Party, as the case may be, such Lenders share (based on the amount of Loans held by each Lender at the time that the applicable unreimbursed expense or indemnity payment is sought or if the Loans have been repaid in
full, based on the amount of Loans held by such Lender immediately prior to such repayment) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or the Collateral Agent, in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or the Collateral Agent in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.10(d).
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Loan Parties shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.
(e) Payments. All amounts due under this Section 11.04 shall be payable not later than ten Business Days after receipt of an invoice or demand therefor.
(f) Survival. The agreements in this Section 11.04 shall survive the resignation of the Agents, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.
11.05 Payments Set Aside. To the extent that any payment by or on behalf of any of the Loan Parties is made to the Administrative Agent or any Lender, or the Administrative 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 the Administrative Agent 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 (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
11.06 Successors and Assigns.
(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may 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 except (i) to an assignee in accordance with the provisions of Section 11.06(b), (ii) by way of
participation in accordance with the provisions of Section 11.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 11.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section 11.06 and, to the extent expressly contemplated hereby, the Related Parties 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 Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment(s) 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 11.06, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if Trade Date is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $1.0 million (and in integral multiples of $1.0 million in excess thereof) and after giving effect thereto, the assigning Lender shall hold a Commitment of at least $1.0 million, unless, in each case, each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;
(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of 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 subsection (b)(i)(B) of this Section 11.06 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 has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; and
(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (i) any Commitment if such assignment is to a Person that is not a Lender with a Commitment, an Affiliate of Lender or an Approved Fund with respect to such Lender or (ii) any Loan to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund (except that the approval of the Administrative Agent shall not be required with respect to one or more assignments of all or any of the Loans to any other Sponsor Affiliated Lender);
(iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any Tax forms required by Section 3.01(e) or (f);
(v) No Assignments to Certain Persons. No such assignment shall be made (A) to Holdings or the Borrower except as permitted under Section 2.03(d) or (B) subject to subsection (h) below, to any of the Sponsor or its Affiliates; and
(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section 11.06, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning 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 and 11.04 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 11.06(d).
(c) Register. 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 and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal and interest amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the Register). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.
The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d) Participations. 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 or the Borrower or any of the Borrowers Affiliates or Subsidiaries) (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, including, for avoidance of doubt, any indemnification obligation with respect to the participated interest, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the 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 to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in clauses (a), (b), (c), (f) and (g) in the first proviso to Section 11.01 that affects such Participant. Subject to subsection (e) of this Section 11.06, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.06(b), provided such Participant agrees to be subject to Section 3.01 as though it were a Lender. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.11 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal and interest amount of each Participants interest in the Loans held by it (the Participant Register); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participants interest in any Commitments, Loans or other obligations under any Loan Document) except to the extent that such disclosure is necessary to establish that any such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.
(e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant except to the extent that such entitlement to any greater payment results from any Change in Law after the Participant becomes a Participant or the sale of the participation to such Participant is made with the Borrowers prior written consent.
(f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any central bank having jurisdiction over such Lender; 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) Electronic Execution of Assignments. The words execution, signed, signature, and words of like import in any Assignment and Assumption 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.
(h) Any Lender may, at any time, assign all or a portion of its rights and obligations under this Agreement to a Person who is or will become, after such assignment, an Sponsor Affiliated Lender subject to the following limitations:
(i) Sponsor 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 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 Sponsor Affiliated Lender that (A) purchases any Loans pursuant to this clause (h) shall represent and warrant to the seller and (B) sells any Loan hereunder shall represent and warrant to the buyer, in each case, that it does not possess non-public information with respect to Holdings, the Borrower and their respective Subsidiaries that has not been disclosed to the Lenders generally (other than Public Lenders) and that would reasonably be expected to be material to a Lenders decision to purchase or sell, as applicable; and
(iii) the aggregate principal amount of Loans held at any one time by Sponsor Affiliated Lenders (measured immediately after giving effect to any such acquisition of Loans) may not exceed 20% of the principal amount of all Loans at such time outstanding.
(i) Notwithstanding anything in Section 11.01 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, or subject to Section 11.06(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 Sponsor 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:
(A) all Loans held by any Sponsor Affiliated Lenders shall be deemed to be not outstanding for all purposes of calculating whether the Required Lenders have taken any actions; and
(B) all Loans held by Sponsor 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 Sponsor 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 Sponsor Affiliated Lender hereby agrees 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 Sponsor Affiliated Lender, such Sponsor Affiliated Lender irrevocably authorizes and empowers the Administrative Agent to vote on behalf of such Sponsor Affiliated Lender with respect to the Loans held by such Sponsor Affiliated Lender in any manner in the Administrative Agents sole discretion, unless the Administrative Agent instructs such Sponsor Affiliated Lender to vote, in which case such
Sponsor Affiliated Lender shall vote with respect to the Loans held by it as the Administrative Agent directs; provided that such Sponsor 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 Sponsor Affiliated Lender in a manner that is less favorable in any material respect to such Sponsor Affiliated Lender than the proposed treatment of similar Obligations held by Lenders that are not Affiliates of the Borrower.
11.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 11.07, 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 (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, or (iii) any funding or financing source of any Lender, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section 11.07 or (ii) becomes available to the Administrative Agent, any Lender, or any of their respective Affiliates on a non-confidential basis from a source other than the Borrower.
For purposes of this Section 11.07, Information means all information received from any Loan Party or any Subsidiary thereof relating to any Loan Party or any Subsidiary thereof or their respective businesses, operations, assets and related matters, other than any such information that is available to the Administrative Agent, any Lender on a non-confidential basis prior to disclosure by any Loan Party or any Subsidiary thereof, provided that, in the case of information received from a Loan Party or any such Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 11.07 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may include material non-public information concerning Holdings or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.
11.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Credit Party and each of its respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to setoff 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 Credit Party or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of
the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Credit Party, irrespective of whether or not such Credit Party shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Credit Party different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Credit Party and their respective Affiliates under this Section 11.08 are in addition to other rights and remedies (including other rights of setoff) that such Credit Party or their respective Affiliates may have. Each Credit Party 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.
11.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the Maximum Rate). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
11.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement 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 telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
11.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Loan, and shall continue in full force and effect as long as any Loan or other Obligation (other than any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement) shall remain unpaid or unsatisfied.
11.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
11.13 Replacement of Lenders. (A) If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or (B) if any Lender is a Defaulting Lender, or (C) if in connection with a proposed amendment, modification, waiver, or consent with respect to any of the provisions hereof as contemplated by Section 11.01, the consent of the Required Lenders shall have been obtained but the consent of one or more of such other Lenders whose consent is required shall not have been obtained, or (D) if 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, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 11.06(b);
(b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and, in the case of any amendment that constitutes, a Repricing Transaction with respect to the Term B Loans prior to the one yearsix month anniversary of the ClosingAmendment No. 1 Effective Date, the fee that would have been payable to such Lender upon the effectiveness of such amendment had such Lender held such Term Loans on the date of effectiveness of such amendment;
(c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and
(d) such assignment does not conflict with applicable Laws.
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.
11.14 Governing Law; Jurisdiction; Etc.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) SUBMISSION TO JURISDICTION. EACH OF THE BORROWER AND EACH OTHER LOAN PARTY 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 COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR 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. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) WAIVER OF VENUE. EACH OF THE BORROWER AND EACH OTHER LOAN PARTY 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. 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.
(d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
11.15 WAIVER OF JURY TRIAL. 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.
11.16 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower and Holdings each acknowledge and agree, and acknowledge their respective Affiliates understanding, that: (i) the arranging and other services regarding this Agreement provided by the Administrative Agent, the Arrangers and the Lenders are arms-length commercial transactions between the Borrower, Holdings and their respective Affiliates, on the one hand, and the Administrative Agent, the Arrangers and the Lenders, on the other hand, (ii) each of the Borrower and Holdings and each other Loan Party has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (iii) the Borrower and Holdings and each other Loan Party is capable of evaluating, and understands and accepts, the terms, risks and
conditions of the transactions contemplated hereby and by the other Loan Documents; (iv) the Administrative Agent, each Arranger, the Co-Documentation Agents and each Lender is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower, Holdings or any of their respective Affiliates, or any other Person and (v) neither the Administrative Agent nor any Arranger or 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 (vi) the Administrative Agent, the Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, Holdings and their respective Affiliates, and neither the Administrative Agent nor the Arrangers or Lenders have any obligation to disclose any of such interests to the Borrower, Holdings and 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 Administrative Agent, the Arrangers and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
11.17 USA PATRIOT Act Notice. Each Lender that is subject to the USA PATRIOT Act (as hereinafter defined) 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. No part of the proceeds of the Loans will be used by the Loan Parties, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
11.18 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
11.19 Attachments. The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.
11.20 Intercreditor Agreement. Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent pursuant to this Agreement or the other Loan Documents and the exercise of any right or remedy by the Collateral Agent hereunder or under the other Loan Documents are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern and control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
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[Signature Page to Credit Agreement]
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[Signature Page to Credit Agreement]
EXHIBIT B
[attached]
AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT
THIS AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT (this Amendment), dated as of April 8, 2013 (the Effective Date), is among JPMORGAN CHASE BANK, N.A., in its capacities as administrative agent and collateral agent (together with its successors and assigns in such capacities, the ABL Agent) for the ABL Lenders and JPMORGAN CHASE BANK, N.A., in its capacities as administrative agent and collateral agent (together with its successors and assigns in such capacities, the Term Agent) for the Term Lenders (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Intercreditor Agreement (as defined below)).
WHEREAS, the ABL Borrower, the ABL Guarantors, the ABL Credit Agreement Lenders and the ABL Agent are parties to that certain Credit Agreement dated as of April 6, 2012 (as such agreement may be amended, supplemented, restated or otherwise modified from time to time, the ABL Credit Agreement); and
WHEREAS, the Term Borrower, the Term Guarantors, the Term Credit Agreement Lenders and the Term Agent are parties to that certain Credit Agreement dated as of April 6, 2012 (as such agreement may be amended, supplemented, restated or otherwise modified from time to time, the Term Credit Agreement); and
WHEREAS, as a condition to the effectiveness of the ABL Credit Agreement and the Term Credit Agreement, the ABL Agent and the Term Agent entered into that certain Intercreditor Agreement dated as of April 6, 2012 (the Intercreditor Agreement); and
WHEREAS, on even date herewith the ABL Credit Agreement and the Term Credit Agreement are being amended to allow, among other things, for an increase in the Term Obligations (the Financing Amendments); and
WHEREAS, the parties hereto desire to amend the Intercreditor Agreement on the terms and conditions set forth herein to allow, among other things, for an increase in the Term Obligations; and
WHEREAS, the execution and delivery of this Amendment is a condition to the effectiveness of the Financing Amendments.
NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the parties hereto hereby agree to amend the Intercreditor Agreement as follows:
SECTION 1 Amendments. In reliance on the representations, warranties, and agreements contained in this Amendment, the Intercreditor Agreement is hereby amended, effective as of the Effective Date, to amend and restate the definitions of Term Documents and Term Obligations in Section 1.2 of the Intercreditor Agreement so that such definitions read in full as follows:
Term Documents shall mean any Term Credit Agreement, any Term Collateral Documents, any Bank Products Agreement between any Term Loan Party and any Term Bank Products Affiliate, any Hedging Agreements between any Term Loan Party and any Term Hedging Affiliate, those other ancillary agreements as to which the Term Agent or any Term Lender is a party or a beneficiary and all other agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any Term Loan Party or any of its respective Subsidiaries or Affiliates, and delivered to the Term Agent, in connection with any of the foregoing or any Term Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time.
Term Obligations shall mean all obligations of every nature of each Term Loan Party from time to time owed to the Term Agent, the Term Lenders or any of them, under any Term Document (including in respect of Incremental Term Loans), whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Term Loan Party, would have accrued on any Term Obligation, whether or not a claim is allowed against such Term Loan Party for such interest in the related bankruptcy proceeding), fees, expenses, indemnification or otherwise, payment for early termination of Hedging Agreements, and all other amounts owing or due under the terms of the Term Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time; provided that the portion of the Term Obligations comprising the aggregate principal amount of outstanding loans in excess of $412,250,000 shall not constitute Term Obligations.
SECTION 2 Representations and Warranties of the ABL Agent. The ABL Agent represents and warrants to the Term Agent that it has the requisite power and authority under the ABL Documents to enter into, execute, deliver, and carry out the terms of this Amendment on behalf of itself and the ABL Lenders and that this Amendment shall be binding obligations of the ABL Agent and the ABL Lenders, enforceable against the ABL Agent and the ABL Lenders in accordance with its terms.
SECTION 3 Representations and Warranties of the Term Agent. The Term Agent represents and warrants to the ABL Agent that it has the requisite power and authority under the Term Documents to enter into, execute, deliver, and carry out the terms of this Amendment on behalf of itself and the Term Lenders and that this Amendment shall be binding obligations of the Term Agent and the Term Lenders, enforceable against the Term Agent and the Term Lenders in accordance with its terms.
SECTION 4 Miscellaneous.
4.1 Continuing Agreement. This Amendment is a continuing agreement and shall (a) remain in full force and effect until the ABL Obligations have been paid in full in cash and all commitments to extend credit under the ABL Documents have been terminated and the
Term Obligations shall have been paid in full in cash, (b) be binding upon the Parties and their successors, transferees and assigns, and (c) inure to the benefit of and be enforceable by the Parties and their respective successors, transferees and assigns.
4.2 Severability. If any of the provisions in this Amendment shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Amendment and shall not invalidate the Lien Priority or the application of Proceeds and other priorities set forth in the Intercreditor Agreement.
4.3 Counterparts. This Amendment may be executed in any number of counterparts, and it is not necessary that the signatures of all Parties be contained on any one counterpart hereof, each counterpart will be deemed to be an original, and all together shall constitute one and the same document. Delivery of an executed signature page to this Amendment by facsimile or other electronic transmission (in .pdf or similar format) shall be as effective as delivery of a manually signed counterpart of this Amendment. This Amendment shall become effective when it shall have been executed by each party hereto.
4.4 Headings. The headings of the sections of this Amendment are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof.
4.5 Governing Law; Entire Agreement. The validity, performance, and enforcement of this Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. This Amendment constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto.
4.6 Submission To Jurisdiction; Waivers. Each of the parties hereto hereby irrevocably and unconditionally agrees that Section 7.14 of the Intercreditor Agreement is incorporated herein mutatis mutandis.
[Signature pages to follow]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers on the date and year first above written.
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JPMORGAN CHASE BANK, N.A., | |
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in its capacity as the ABL Agent | |
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By: |
/s/ Andrew Ray |
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Name: |
Andrew Ray |
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Title: |
Authorized Officer |
SIGNATURE PAGE TO
AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT
THE CONTAINER STORE, INC.
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JPMORGAN CHASE BANK, N.A., | |
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in its capacity as the Term Agent | |
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By: |
/s/ David L. Howard |
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Name: |
DAVID L. HOWARD |
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Title: |
AUTHORIZED OFFICER |
SIGNATURE PAGE TO
AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT
THE CONTAINER STORE, INC.
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ACKNOWLEDGED AND AGREED: | |
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THE CONTAINER STORE, INC., as Borrower | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS HOLDINGS, INC., | |
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TCS GIFT CARD SERVICES, LLC, | |
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TCS INSTALLATION SERVICES, LLC, | |
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each as a Guarantor | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
SIGNATURE PAGE TO
AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT
THE CONTAINER STORE, INC.
Exhibit 10.9
TERM FACILITY PLEDGE AGREEMENT
TERM FACILITY PLEDGE AGREEMENT (this Agreement), dated as of April 6th, 2012, by and between (a) THE CONTAINER STORE, INC., a Texas corporation (the Borrower), (b) each subsidiary listed on Schedule II (together with the Borrower and, collectively together with any subsidiary that becomes a party hereto pursuant to Section 4.15 of the Security Agreement, in such capacities and together with any successor in such capacities, the Pledgors, and each, a Pledgor), and (c) JPMORGAN CHASE BANK, N.A., a national banking association, as collateral agent (in such capacity, the Collateral Agent) for its own benefit and the benefit of the other Credit Parties (as defined in the Credit Agreement referred to below), in consideration of the mutual covenants contained herein and benefits to be derived herefrom.
WITNESSETH:
WHEREAS, reference is made to that certain Credit Agreement (the Credit Agreement), dated as of April 6th, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement), by and among, among others, (i) the Borrower, (ii) the Guarantors (iii) JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties, (iv) the Collateral Agent for its own benefit and the benefit of the other Credit Parties and (v) the lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), among others; and
WHEREAS, the obligations of the Lenders to make Loans are conditioned upon, among other things, the execution and delivery by the Pledgors of (i) that certain Term Facility Security Agreement, dated as of April 6th, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Security Agreement), by and between, among others, the Pledgors and the Collateral Agent, pursuant to which the each Pledgor grants to the Collateral Agent (for its own benefit and the benefit of the other Credit Parties) a security interest in and to the Collateral (as defined therein), and (ii) an agreement in the form hereof, pursuant to which each Pledgor grants to the Collateral Agent (for its own benefit and the benefit of the other Credit Parties) a security interest in and to the Pledged Collateral (as defined herein), in order to secure the Secured Obligations (as defined herein).
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgors and the Collateral Agent, on its own behalf and on behalf of the other Credit Parties (and each of their respective successors or permitted assigns), hereby agrees as follows:
SECTION 1
Definitions
1.1 Generally. All references herein to the UCC shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if a term is defined in Article 9 of the UCC differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of the security interest in any Pledged Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, UCC means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.
1.2 Definitions of Certain Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement. In addition, as used herein, the following terms shall have the following meanings:
ABL Collateral Agent shall mean JPMorgan Chase Bank, N.A., in its capacity as collateral agent under the ABL Credit Agreement, and its successors and permitted assigns.
ABL Credit Agreement shall have the meaning assigned to such term in the Security Agreement.
ABL Priority Collateral shall have the meaning assigned to such term in the Intercreditor Agreement.
Administrative Agent shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Agreement shall have the meaning assigned to such term in the preamble to this Agreement.
Blue Sky Laws shall have the meaning assigned to such term in Section 7.7 of this Agreement.
Borrower shall have the meaning assigned to such term in the preamble to this Agreement.
Collateral shall have the meaning assigned to such term in the Security Agreement.
Collateral Agent shall have the meaning assigned to such term in the preamble of this Agreement.
Credit Agreement shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Financing Statement shall have the meaning assigned to such term in the Security Agreement.
Guarantor and Guarantors shall have the meaning assigned to such terms in the Credit Agreement.
Investment Property shall have the meaning assigned to such term in the Security Agreement.
Issuer shall have the meaning assigned to such term in Section 2.1 of this Agreement.
Lender and Lenders shall have the meaning assigned to such terms in the preliminary statement of this Agreement.
Permitted Disposition shall have the meaning assigned to such term in the Security Agreement.
Permitted Liens shall have the meaning assigned to such term in the Security Agreement.
Pledged Collateral shall have the meaning assigned to such term in Section 2.5 of this Agreement.
Pledged Securities shall have the meaning assigned to such term in Section 2.1 of this Agreement.
Pledgor shall have the meaning assigned to such term in the preamble of this Agreement.
Secured Obligations shall mean the Obligations (as defined in the Credit Agreement).
Securities Act shall have the meaning assigned to such term in Section 7.7 of this Agreement.
Securities Intermediary shall have the meaning assigned to such term in the UCC.
Security Agreement shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Uncertificated Security shall have the meaning assigned to such term in the UCC.
Voting Equity Interests shall have the meaning assigned to such term in the Security Agreement.
1.3 Rules of Interpretation. The rules of interpretation specified in Article I of the Credit Agreement shall be applicable to this Agreement.
SECTION 2
Pledge
As security for the payment or performance, as the case may be, in full of the Secured Obligations, each Pledgor hereby grants to the Collateral Agent, its successors and permitted assigns, for its own benefit and the benefit of the other Credit Parties, a security interest in and pledge of all of the Pledgors right, title and interest in, to and under:
2.1 all shares of capital stock, limited liability company membership interests and other Equity Interests owned by each Pledgor, including in each entity designated as an Issuer on Schedule I hereto (each an Issuer), and any shares of capital stock, limited liability company membership interests or other Equity Interests obtained in the future by each Pledgor, and the stock certificates or other security certificates (as defined in the UCC) representing all such shares, membership interests or other Equity Interests (the Pledged Securities); provided however, that the Pledged Securities shall not include, and the security interest shall not attach to: (i) equity interests in joint ventures or any non-wholly-owned Subsidiaries, but only to the extent that the organizational documents or other agreements with other equity holders do not permit or restrict the pledge of such equity interests, (ii) more than 65% of the outstanding Voting Equity Interests of any (x) CFC or (y) U.S. Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of its assets consist of the capital stock of one or more Foreign Subsidiaries and (iii) equity interests in any Unrestricted Subsidiary;
2.2 all other Investment Property that may be delivered to, and held by, the ABL Collateral Agent, as agent for the Collateral Agent and the other Credit Parties, among others, pursuant to the terms of the Intercreditor Agreement, or the Collateral Agent pursuant to the terms hereof;
2.3 subject to Section 6, all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed or distributable, in respect of, or in exchange for, the Pledged Securities and other Investment Property referred to in clauses 2.1 and 2.2 above;
2.4 subject to Section 6, all rights and privileges of each Pledgor with respect to the Pledged Securities and other Investment Property referred to in clauses 2.1, 2.2, and 2.3 above; and
2.5 all proceeds of any of the foregoing (the items referred to in clauses 2.1 through 2.4 being collectively referred to as the Pledged Collateral).
TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and permitted assigns, for its own benefit and the benefit of the other Credit Parties,
until (i) the Commitments have expired or been terminated and (ii) all of the Secured Obligations have been paid in full in cash or otherwise satisfied (other than any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement or the Credit Agreement); subject, however, to the terms, covenants and conditions hereinafter set forth.
Upon delivery to the Collateral Agent or the ABL Collateral Agent pursuant to Section 3 of this Agreement, (a) all stock certificates or other securities now or hereafter included in the Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer reasonably satisfactory to the Collateral Agent and the ABL Collateral Agent and by such other instruments and documents as the Collateral Agent and the ABL Collateral Agent may reasonably request, and (b) all other Investment Property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the Pledgor and such other instruments or documents as the Collateral Agent and the ABL Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the Pledged Securities theretofore and then being pledged hereunder, which schedule shall be attached hereto as Schedule I and made a part hereof. Each schedule so delivered shall supersede any prior schedules so delivered.
SECTION 3
Delivery of the Pledged Collateral
3.1 On or before the Closing Date, each Pledgor shall deliver or cause to be delivered to the Collateral Agent (with copies to the ABL Collateral Agent), as agent for the Collateral Agent and the other Credit Parties, among others, pursuant to the terms of the Intercreditor Agreement, any and all Pledged Securities, any and all Investment Property, and any and all original certificates or other instruments or documents representing the Pledged Collateral (in each case, other than any Investment Property that is held by or credited to the books of a Securities Intermediary); provided, however, that with respect to (i) any Uncertificated Security, (ii) any limited liability company interest that (x) is not represented by a certificate or (y) is not a Security, as defined in the UCC, and (iii) any partnership interest that (x) is not represented by a certificate or (y) is not a Security, as defined in the UCC, upon the request of the Collateral Agent or the ABL Collateral Agent, the Pledgors shall cause the Issuer thereof to duly authorize, execute and deliver to the Collateral Agent and the ABL Collateral Agent an agreement in form and substance satisfactory to the Collateral Agent and the ABL Collateral Agent, pursuant to which such Issuer agrees to comply with any and all instructions originated by (i) until the date upon which the Discharge of Term Obligations (as defined in the Intercreditor Agreement) shall have occurred, the Collateral Agent and (ii) from and after the date upon which the Discharge of Term Obligations shall have occurred, the ABL Collateral Agent, in each case without further consent by the registered owner of such Uncertificated Security, limited liability company interest or partnership interest, and not to comply with any instructions regarding such Uncertificated Security, limited liability company interest or partnership interest originated by any other Person (other than a court of competent jurisdiction).
3.2 After the Closing Date, promptly upon any Pledgors acquiring any Pledged Securities, and any original certificates or other instruments or documents representing such Pledged Securities, such Pledgor shall deliver or cause to be delivered such Pledged Collateral (i) until the date upon which the Discharge of Term Obligations (as defined in the Intercreditor Agreement) shall have occurred, to the Collateral Agent (with copies to the ABL Collateral Agent), as agent for the Collateral Agent and the other Credit Parties, among others, pursuant to the terms of the Intercreditor Agreement, and (ii) from and after the date upon which the Discharge of Term Obligations shall have occurred, to the Collateral Agent (in each case, other than any Investment Property that is held by or credited to the books of a Securities Intermediary); provided, however, that if at any time after the Closing Date such Pledgor shall own any (i) Uncertificated Security, (ii) any limited liability company interest that (x) is not represented by a certificate or (y) is not a Security, as defined in the UCC or (iii) any partnership interest that (x) is not represented by a certificate or (y) is not a Security, as defined in the UCC, the Pledgors shall cause the issuer thereof to comply promptly with the requirements of the proviso to Section 3.1 with respect thereto.
3.3 Each of the Pledgors hereby irrevocably authorizes the Collateral Agent, at any time and from time to time, to file in any appropriate filing office, wherever located, any Financing Statement describing the Pledged Collateral that contains any information required by the UCC of the applicable jurisdiction for the sufficiency or filing office acceptance of any Financing Statement. Each Pledgor also authorizes the Collateral Agent to take any and all actions required by any applicable Law to perfect and protect the security interest granted hereunder. Each Pledgor shall provide the Collateral Agent with any information the Collateral Agent shall reasonably request in connection with any of the foregoing.
3.4 Prior to the satisfaction of the Discharge of ABL Obligations, with respect to any obligation under this Agreement, any other Collateral Document, or the Credit Agreement to deliver possession or control of any Collateral on which there is a Second Priority Lien by the Collateral Agent, such obligation shall be deemed satisfied by the delivery of possession or control of such Collateral to the Collateral Agent for the ABL Credit Agreement (holding for the benefit of the Collateral Agent for the Credit Parties).
SECTION 4
Representations, Warranties and Covenants
The Pledgors hereby jointly and severally represent, warrant and covenant, as to each Pledgor and the Pledged Collateral pledged by each Pledgor hereunder, to and with the Collateral Agent that:
4.1 Schedule I sets forth a true and correct list of all Equity Interests owned by each Pledgor and the Pledged Securities represent that percentage of the issued and outstanding shares of each class of the capital stock or other Equity Interest of the Issuer with respect thereto as set forth on Schedule I;
4.2 except for the security interest granted hereunder, and except as otherwise permitted in the Credit Agreement and the other Loan Documents, each Pledgor (i) is and will at all times continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule I, (ii) holds the Pledged Collateral free and clear of all Liens, other than Permitted Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in, or other Lien on, the Pledged Collateral, other than pursuant hereto and other than Permitted Liens, and (iv) other than as permitted in Section 6.2, will cause any and all distributions in cash or in kind made on the Pledged Collateral to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder;
4.3 except in compliance with the Credit Agreement, no Pledgor will consent to or approve the issuance of (a) any additional shares of any class of capital stock of any Issuer of the Pledged Securities, or the issuance of any membership interests or other Equity Interests in any such Person, (b) any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or nonoccurrence of any event or condition into, or exchangeable for, any such shares, membership interests or other Equity Interests, or (c) any warrants, options, rights, or other commitments entitling any person to purchase or otherwise acquire any such shares, membership interests or other Equity Interests;
4.4 each Pledgor (i) has the power and authority to pledge the Pledged Collateral in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than Permitted Liens), however arising, of all Persons whomsoever;
4.5 except for consents or approvals already obtained, no consent of any other Person (including stockholders or creditors of the Pledgors), and no consent or approval of any Governmental Authority or any securities exchange, was or is necessary to the validity of the pledge effected hereby or to the disposition of the Pledged Collateral upon an Event of Default in accordance with the terms of this Agreement and the Security Agreement;
4.6 by virtue of the execution and delivery by each Pledgor of this Agreement, and the delivery by each Pledgor to the Collateral Agent, as agent for the Credit Parties, among others, pursuant to the terms of the Intercreditor Agreement, of the stock certificates or other certificates or documents representing or evidencing the Pledged Collateral in accordance with the terms of this Agreement, the Collateral Agent will obtain a valid and perfected Lien upon, and security interest in, the Pledged Collateral as security for the payment and performance of the Secured Obligations;
4.7 all of the Pledged Securities set forth on Schedule I have been duly authorized and validly issued and, to the extent applicable, are fully paid and nonassessable; and
4.8 all information set forth herein relating to the Pledged Collateral is accurate and complete in all material respects as of the date hereof.
SECTION 5
Registration in Nominee Name; Copies of Notices
Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent, on its own behalf and on behalf of the other Credit Parties, shall have the right (in its reasonable discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of each Pledgor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in its name.
SECTION 6
Voting Rights; Dividends and Interest, Etc.
6.1 Unless and until the Pledgors receive notice that an Event of Default has occurred and is continuing, the Pledgors shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of the Pledged Securities or any part thereof to the extent, and only to the extent, that such rights are exercised for any purpose consistent with, and not otherwise in violation of, the terms and conditions of this Agreement, the Credit Agreement, the other Loan Documents and applicable Law; provided, however, that no Pledgor will be entitled to exercise any such right if the result thereof could reasonably be expected to materially and adversely affect the rights and remedies of any of the Credit Parties under this Agreement, the Credit Agreement or any other Loan Document or the ability of the Credit Parties to exercise the same.
6.2 Unless and until any Pledgor receives notice that an Event of Default has occurred and is continuing, each Pledgor shall be entitled to receive and retain any and all cash dividends or other cash distributions paid on the Pledged Collateral to the extent, and only to the extent, that such cash dividends or other cash distributions are permitted by, and otherwise paid in accordance with, the terms and conditions of this Agreement, the Credit Agreement, the other Loan Documents and applicable Law. All noncash dividends, and all dividends paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid-in surplus, and all other distributions (other than dividends and distributions referred to in the preceding sentence) made on or in respect of the Pledged Collateral, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock, membership interests or other Equity Interests of the Issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, amalgamation, arrangement, consolidation, acquisition or other exchange of assets to which such Issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Pledgor, to the extent required to be paid to the Collateral Agent pursuant to the terms of the Credit Agreement or the other Loan Documents, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and the ABL Collateral Agent and shall be forthwith delivered (except to the extent that such dividends or other cash distributions
constitute ABL Priority Collateral) to the Collateral Agent, in the same form as so received (with any necessary endorsement).
6.3 Upon the Pledgors receipt of notice that an Event of Default has occurred and is continuing, all rights of the Pledgors to dividends or other cash distributions that the Pledgors are authorized to receive pursuant to Section 6.2 above shall cease, and all such rights shall thereupon become vested in the Collateral Agent and the ABL Collateral Agent, subject to the terms of the Intercreditor Agreement, which shall have the sole and exclusive right and authority to receive and retain such dividends or other cash distributions. All dividends or other cash distributions received by the Pledgors contrary to the provisions of this Section 6.3 shall be held in trust for the benefit of the Collateral Agent and the ABL Collateral Agent, shall be segregated from other property or funds of the Pledgors and shall be forthwith delivered to the Collateral Agent. Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this Section 6.3 shall be applied in accordance with the provisions of Section 8. After all Events of Default have been cured or waived in writing by the Collateral Agent, each Pledgor will have the right to receive the dividends or other cash distributions that it would otherwise be entitled to receive pursuant to the terms of Section 6.2 above.
6.4 Upon the Pledgors receipt of notice that an Event of Default has occurred and is continuing, all rights of the Pledgors to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to Section 6.1 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived in writing by the Collateral Agent, each Pledgor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of Section 6.1.
SECTION 7
Remedies upon Default
Upon the occurrence and during the continuance of an Event of Default, it is agreed that the Collateral Agent shall have in any jurisdiction in which enforcement hereof is sought, in addition to all other rights and remedies, the rights and remedies of a secured party under the UCC or other applicable Law. The rights and remedies of the Collateral Agent shall include, without limitation, the right to take any or all of the following actions at the same or different times:
7.1 The Collateral Agent may sell or otherwise dispose of all or any part of the Pledged Collateral, at public or private sale or at any brokers board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. Each purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Pledgor.
7.2 The Collateral Agent shall give each Pledgor at least ten (10) days prior written notice, by authenticated record, of the Collateral Agents intention to make any sale of the Pledged Collateral. Such notice, (i) in the case of a public sale, shall state the date, time and place for such sale, (ii) in the case of a sale at a brokers board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Pledged Collateral, or portion thereof, will first be offered for sale at such board or exchange, and (iii) in the case of a private sale, shall state the date after which any private sale or other disposition of the Pledged Collateral shall be made. Each Pledgor agrees that such written notice shall satisfy all requirements for notice to any Pledgor which are imposed under the UCC with respect to the exercise of the Collateral Agents rights and remedies upon default. The Collateral Agent shall not be obligated to make any sale or other disposition of any Pledged Collateral if it shall determine not to do so, regardless of the fact that notice of sale or other disposition of such Pledged Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned.
7.3 Any public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale.
7.4 At any public (or, to the extent permitted by applicable Law, private) sale made pursuant to this Section 7, the Collateral Agent or any other Credit Party may bid for or purchase, free (to the extent permitted by applicable Law) from any right of redemption, stay, valuation or appraisal on the part of any Pledgor, the Pledged Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to the Collateral Agent or such other Credit Party from any Pledgor on account of the Secured Obligations as a credit against the purchase price, and the Collateral Agent or such other Credit Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to the Pledgor therefor.
7.5 For purposes hereof, a written agreement to purchase the Pledged Collateral or any portion thereof shall be treated as a sale thereof. The Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Pledgor shall be entitled to the return of the Pledged Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full.
7.6 As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Pledged Collateral and to sell the Pledged Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver.
7.7 Each Pledgor recognizes that (a) the Collateral Agent may be unable to effect a public sale of all or a part of the Pledged Collateral by reason of certain prohibitions contained in
the Securities Act of 1933, 15 U.S.C. §77, (as amended and in effect, the Securities Act) or the Securities laws of various states (the Blue Sky Laws), but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof, (b) that private sales so made may be at prices and upon other terms less favorable to the seller than if the Pledged Collateral were sold at public sales, (c) that neither the Collateral Agent nor any other Credit Party has any obligation to delay sale of any of the Pledged Collateral for the period of time necessary to permit the Pledged Collateral to be registered for public sale under the Securities Act or the Blue Sky Laws, and (d) that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.
7.8 To the extent permitted by applicable Law, each Pledgor hereby waives all rights of redemption, stay, valuation and appraisal which each Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. In dealing with or disposing of the Pledged Collateral or any part thereof, neither the Collateral Agent nor any other Credit Party shall be required to give priority or preference to any item of Pledged Collateral or otherwise to marshal assets or to take possession or sell any Pledged Collateral with judicial process.
SECTION 8
Application of Proceeds of Sale
After the occurrence and during the continuance of an Event of Default and acceleration of the Secured Obligations, the Collateral Agent shall apply the proceeds of any collection or sale of the Pledged Collateral, as well as any Pledged Collateral consisting of cash, in accordance with Section 8.03 of the Credit Agreement.
The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale or other disposition of the Pledged Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale or other disposition shall be a sufficient discharge to the purchaser or purchasers of the Pledged Collateral so sold or otherwise disposed of and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.
SECTION 9
[Reserved.]
SECTION 10
Further Assurances
Subject to the Intercreditor Agreement, each Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments, as the Collateral Agent may at any time reasonably request in connection with the administration and enforcement of this Agreement or with respect to the Pledged Collateral or any part thereof or in order better to assure and confirm unto the Collateral Agent its rights and remedies hereunder.
SECTION 11
Intent
This Agreement is being executed and delivered by the Pledgors for the purpose of confirming the grant of the security interest of the Collateral Agent in the Pledged Collateral. It is intended that the security interest granted pursuant to this Agreement is granted as a supplement to, and not in limitation of, the security interest granted to the Collateral Agent, for its own benefit and the benefit of the other Credit Parties, under the Security Agreement. All provisions of the Security Agreement (including, without limitation, the rights, remedies, powers, privileges and discretions of the Collateral Agent thereunder) shall apply to the Pledged Collateral. In the event of a conflict between this Agreement and the Security Agreement, the terms of this Agreement shall control with respect to the Pledged Collateral and the terms of the Security Agreement shall control with respect to all other Collateral.
SECTION 12
Termination; Release of Pledged Collateral
12.1 Any Lien upon any Pledged Collateral will be released automatically if the Pledged Collateral constitutes property being sold, transferred or disposed of in a Permitted Disposition. Upon at least two (2) Business Days prior written request by the Pledgors, the Collateral Agent shall execute such documents as may be necessary to evidence the release of the Liens upon any Pledged Collateral described in this Section 12.1; provided, however, that (i) the Collateral Agent shall not be required to execute any such document on terms which, in its reasonable opinion, would, under applicable Law, expose the Collateral Agent to liability or entail any adverse consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Secured Obligations or any Liens (other than those expressly being released) upon (or obligations of the Pledgors in respect of) all interests retained by the Pledgors, including, without limitation, the Proceeds of any sale, all of which shall continue to constitute part of the Pledged Collateral.
12.2 Except for those provisions which expressly survive the termination thereof, this Agreement and the Security Interest granted herein shall terminate when (i) the Commitments have expired or been terminated and (ii) all of the Secured Obligations have been paid in full in
cash or otherwise satisfied (other than any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement or the Credit Agreement), at which time the Collateral Agent shall return all Pledged Collateral to the Pledgors and execute and deliver to the Pledgors, at the Pledgors expense, all UCC termination statements, releases and similar documents that the Pledgors shall reasonably request to evidence such termination; provided, however, that the Credit Agreement, this Agreement, and the security interest granted herein shall be reinstated if at any time payment, or any part thereof, of any Secured Obligation is rescinded or must otherwise be restored by any Credit Party upon the bankruptcy or reorganization of any Pledgor. Any execution and delivery of termination statements, releases or other documents pursuant to this Section 12.2 shall be without recourse to, or warranty by, the Collateral Agent or any other Credit Party.
SECTION 13
Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14
Intercreditor Agreement
Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and the terms of this Agreement, the terms of the Intercreditor Agreement shall govern and control.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
PLEDGORS: |
THE CONTAINER STORE, INC. | |
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By: |
/s/ Melissa Reiff |
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Name: |
Melissa Reiff |
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Title: |
President |
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TCS HOLDINGS, INC. | |
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| |
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| |
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By: |
/s/ Melissa Reiff |
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Name: |
Melissa Reiff |
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Title: |
President |
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TCS Gift Card Services, LLC | |
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| |
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| |
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By: |
/s/ Melissa Reiff |
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Name: |
Melissa Reiff |
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Title: |
President |
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TCS Installation Services, LLC | |
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| |
|
| |
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By: |
/s/ Melissa Reiff |
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Name: |
Melissa Reiff |
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Title: |
President |
[Signature Page to Pledge Agreement]
COLLATERAL AGENT: |
JPMORGAN CHASE BANK, N.A. | |
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| |
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| |
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By: |
/s/ David L. Howard |
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Name: David L. Howard |
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Title: Authorized Officer |
[Signature Page to Pledge Agreement]
SCHEDULE I
None of the issuers has any authorized, issued or outstanding shares of its capital stock or other Equity Interest of any class or any commitments to issue any shares of its capital stock or other Equity Interest of any class or any securities convertible into or exchangeable for any shares of its capital stock or other Equity Interest of any class except as otherwise stated in this Schedule I.
Issuer |
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Record Owner |
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Class of |
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Issued / |
|
Number |
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Percentage |
The Container Store, Inc. |
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TCS Holdings, Inc. |
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Common Stock |
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1 |
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1 |
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100% / 100% |
TCS Gift Card Services, LLC |
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The Container Store, Inc. |
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Membership Interests |
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N/A |
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100% |
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100% / 100% |
TCS Installation Services, LLC |
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The Container Store, Inc. |
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Membership Interests |
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N/A |
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100% |
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100% / 100% |
Elfa International AB |
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The Container Store, Inc. |
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Share Capital |
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550,248 |
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550,248 |
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100% / 65% |
SCHEDULE II
Pledgors
The Container Store, Inc.
TCS Holdings, Inc.
TCS Gift Card Services, LLC
TCS Installation Services, LLC
Exhibit 10.10
TERM FACILITY SECURITY AGREEMENT
This TERM FACILITY SECURITY AGREEMENT (this Agreement), dated as of April 6th, 2012, by and among The Container Store, Inc., a Texas corporation (the Borrower), each of the guarantors listed on Schedule I hereto (each such Person, individually, a Guarantor and, collectively, the Guarantors) (the Borrower and the Guarantors are hereinafter referred to, individually, as a Grantor and, collectively together with any subsidiary that becomes a party hereto pursuant to Section 4.15, as the Grantors), and JPMorgan Chase Bank, N.A., a national banking association, as collateral agent (in such capacity, the Collateral Agent) for its own benefit and the benefit of the other Credit Parties (as defined in the Credit Agreement referred to below), in consideration of the mutual covenants contained herein and benefits to be derived herefrom.
WITNESSETH:
WHEREAS, reference is made to that certain Credit Agreement, dated as of April 6th, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement), by and among the Borrower, the Guarantors, JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties, the Collateral Agent and the lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), pursuant to which the Lenders have agreed to make Loans to the Borrower upon the terms and subject to the conditions specified therein; and
WHEREAS, the obligations of the Lenders to make Loans are conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to secure the Secured Obligations (as defined herein).
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantors and the Collateral Agent, on its own behalf and on behalf of the other Credit Parties (and each of their respective successors or permitted assigns), hereby agree as follows:
ARTICLE 1
Definitions
SECTION 1.01 Generally. All references herein to the UCC shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if a term is defined in Article 9 of the UCC differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of the Security Interest in any Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other
879182
than New York, UCC means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.
SECTION 1.02 Definition of Certain Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement. In Addition, as used herein, the following terms shall have the following meanings:
ABL Credit Agreement shall mean the credit agreement governing the ABL Credit Facility, as in effect on the date hereof.
ABL Collateral Agent shall mean JPMorgan Chase Bank, N.A., in its capacity as Collateral Agent under the ABL Credit Facility, and its successors and permitted assigns.
ABL Priority Collateral shall have the meaning assigned to such term in the Intercreditor Agreement.
Accessions shall have the meaning given that term in the UCC.
Accounts means accounts as defined in the UCC, and also means a right to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a policy of insurance issued or to be issued, (d) for a secondary obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information contained on or for use with the card.
Account Debtor shall have the meaning given that term in the UCC.
Administrative Agent shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Agreement shall have the meaning assigned to such term in the preamble of this Agreement.
Blue Sky Laws shall have the meaning assigned to such term in Section 6.01 of this Agreement.
Borrower shall have the meaning assigned to such term in the preamble of this Agreement.
Chattel Paper shall have the meaning given that term in the UCC.
Collateral shall mean all personal property and fixtures of each Grantor, including, without limitation, all: (a) Accounts, (b) Chattel Paper, (c) Commercial Tort Claims (including, but not limited to, those Commercial Tort Claims listed on Schedule 3.07 hereto), (d) Deposit Accounts, (e) Documents, (f) Equipment, (g) Fixtures, (h) General Intangibles
(including Payment Intangibles), (i) Goods, (j) Instruments, (k) Inventory, (l) Investment Property, (m) Letter-of-Credit Rights, (n) Intellectual Property and Software, (o) Supporting Obligations, (p) money, policies and certificates of insurance, deposits, cash, or other property, (q) all books, records, and information relating to any of the foregoing ((a) through (p)) and/or to the operation of any Grantors business, and all rights of access to such books, records, and information, and all property in which such books, records, and information are stored, recorded and maintained, (r) all insurance proceeds, refunds, and premium rebates, including, without limitation, proceeds of fire and credit insurance, whether any of such proceeds, refunds, and premium rebates arise out of any of the foregoing ((a) through (q)) or otherwise, (s) all liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing ((a) through (r)), including the right of stoppage in transit, and (t) any of the foregoing, whether now owned or now due, or in which any Grantor has an interest, or hereafter acquired, arising, or to become due, or in which any Grantor obtains an interest, and all products, Proceeds, substitutions, and Accessions of or to any of the foregoing; provided, however, that the Collateral shall not include, and the Security Interest shall not attach to: (i) any governmental licenses or state or local franchises, charters and authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby (except to the extent such prohibition or restriction is ineffective under the Uniform Commercial Code of any applicable jurisdiction) other than proceeds thereof, the assignment of which is expressly deemed effective under the Uniform Commercial Code of any applicable jurisdiction notwithstanding such prohibition, (ii) any asset the pledge of which or a security interest in which is prohibited by applicable law (including any requirement to obtain the consent of any Governmental Authority), (iii) equity interests in joint ventures or any non-wholly-owned Subsidiaries, but only to the extent that the organizational documents or other agreements with other equity holders do not permit or restrict the pledge of such equity interests, (iv) agreements, licenses and leases the pledge of which or the security interest in which is prohibited or restricted by such agreements, licenses and leases (including pursuant to any requirement to obtain the consent of any Governmental Authority or third party), to the extent prohibited or restricted thereby (except to the extent such prohibition or restriction is ineffective under the Uniform Commercial Code of any applicable jurisdiction) other than proceeds of such agreements, license or leases, the assignment of which is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibition, (v) any intent to use trademark applications, (vi) more than 65% of the outstanding Voting Equity Interests of any (x) CFC or (y) U.S. Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of its assets consist of the capital stock of one or more Foreign Subsidiaries, (vii) Equity Interests in any Unrestricted Subsidiary, (viii) any fee owned real property with a value of less than $5,000,000 and any leasehold interest in real property and (ix) any specifically identified asset with respect to which the Collateral Agent has determined in writing (in its reasonable judgment) that the costs of obtaining, perfecting or maintaining a security interest in such assets exceeds the fair market value (as determined by the Borrower in its reasonable judgment) thereof or the practical benefit to the Credit Parties afforded thereby.
Collateral Agent shall have the meaning assigned to such term in the preamble of this Agreement.
Collateral Agents Rights and Remedies shall have the meaning assigned to such term in Section 8.08.
Commercial Tort Claim shall have the meaning given that term in the UCC.
Commodity Account shall have the meaning given that term in the UCC.
Commodity Account Control Agreement shall mean, with respect to any Commodity Account as to which a Grantor is the Commodity Customer, an agreement by such Grantor, the Collateral Agent and the relevant Commodity Intermediary that the Commodity Intermediary will apply any value distributed on account of the Commodity Contracts carried in such Commodity Account as directed by the Collateral Agent without further consent by such Grantor. Each such agreement must be satisfactory in form and substance to the Collateral Agent.
Commodity Contract shall have the meaning given that term in the UCC.
Commodity Customer shall have the meaning given that term in the UCC.
Commodity Intermediary shall have the meaning given that term in the UCC.
Control shall have the meaning given that term in the UCC.
Controlled Commodity Account shall mean a Commodity Account as to which (i) a Grantor is the Commodity Customer and (ii) a Commodity Account Control Agreement is in effect.
Controlled Deposit Account means a Deposit Account that is subject to a Deposit Account Control Agreement.
Controlled Securities Account shall mean a Securities Account that (i) is maintained in the name of a Grantor at an office of a Securities Intermediary located in the United States and (ii) together with all Financial Assets credited thereto and all related Security Entitlements, is subject to a Securities Account Control Agreement among such Grantor, the Collateral Agent and such Securities Intermediary.
Credit Agreement shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Deposit Account shall have the meaning given that term in the UCC and shall also include all demand, time, savings, passbook, or similar accounts maintained with a bank or other financial institution.
Deposit Account Control Agreement shall mean, (x) with respect to any Term Priority Cash Collateral Account, an agreement in form and substance satisfactory to the Collateral Agent among the relevant Grantor, the Collateral Agent, the ABL Collateral Agent and the relevant Depositary Bank and (y) with respect to any other Controlled Deposit
Account, a Blocked Account Agreement, substantially in the form of Exhibit K to the ABL Credit Agreement (as in effect on the date hereof), (with any changes that the Collateral Agent and the ABL Collateral Agent shall have approved,), in either case (i) providing that the relevant Depositary Bank will comply with instructions originated by the Collateral Agent or the ABL Collateral Agent, as applicable, directing disposition of the funds in such Deposit Account, without further consent by any Grantor, and (ii) subordinating to the Lien of the Credit Parties all claims of the Depositary Bank to such Controlled Deposit Account (except its right to deduct its normal operating charges and any uncollected funds previously credited thereto).
Depositary Bank shall mean a bank at which a Deposit Account is maintained.
Documents shall have the meaning given that term in the UCC.
Electronic Chattel Paper shall have the meaning given that term in the UCC.
Entitlement Orders shall have the meaning given that term in the UCC.
Equipment shall mean equipment, as defined in the UCC, and shall also mean all furniture, store fixtures, motor vehicles, rolling stock, machinery, office equipment, plant equipment, tools, dies, molds, and other goods, property, and assets which are used and/or were purchased for use in the operation or furtherance of a Grantors business, and any and all Accessions or additions thereto, and substitutions therefor.
Excluded Account means any (a) deposit account which is used for purposes of funding payroll, payroll taxes, employee benefit payments, (b) deposit accounts which are zero balance accounts, (c) other controlled disbursement accounts, (d) trust accounts, (e) petty cash accounts, (f) deposit accounts to the extent holding funds from unredeemed gift cards and (g) other deposit accounts with a demand deposit balance not exceeding $10,000 individually and $100,000 in the aggregate at any time.
Financial Asset shall have the meaning given that term in the UCC.
Financing Statement shall have the meaning given that term in the UCC.
Fixtures shall have the meaning given that term in the UCC.
General Intangibles shall have the meaning given that term in the UCC, and shall also include, without limitation, all: Payment Intangibles; rights to payment for credit extended; deposits; amounts due to any Grantor; credit memoranda in favor of any Grantor; warranty claims; tax refunds and abatements; insurance refunds and premium rebates; all means and vehicles of investment or hedging, including, without limitation, options, warrants, and futures contracts; records; customer lists; telephone numbers; goodwill; causes of action; judgments; rights to collect payments under any settlement or other agreement; literary rights; rights to performance; royalties; license and/or franchise fees; rights of admission; licenses, including, without limitation; franchises; license agreements, including all rights of any
Grantor to enforce same; permits, certificates of convenience and necessity, and similar rights granted by any governmental authority; developmental ideas and concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs; technical data; tapes, disks, semi-conductors chips and printouts; IP Collateral (as defined in the Intellectual Property Security Agreement); proposals; cost estimates, and reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter related to, or connected with, the design, development, manufacture, sale, marketing, leasing, or use of any or all property produced, sold, or leased, by or credit extended or services performed, by any Grantor, whether intended for an individual customer or the general business of any Grantor, or used or useful in connection with research by any Grantor.
Goods shall have the meaning given that term in the UCC.
Grantor and Grantors shall have the meaning assigned to such terms in the preamble of this Agreement.
Guarantor and Guarantors shall have the meaning assigned to such terms in the preamble of this Agreement.
Indemnitee shall have the meaning assigned to such term in Section 8.06 of this Agreement.
Instruments shall have the meaning given that term in the UCC.
Intellectual Property Security Agreement shall mean that certain Intellectual Property Security Agreement dated the date hereof among the Borrower and the Collateral Agent.
Inventory shall have the meaning given that term in the UCC, and shall also include, without limitation, all: (a) Goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) Goods of said description in transit; (c) Goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.
Investment Property shall have the meaning given that term in the UCC.
Joinder Agreement shall mean an agreement substantially in the form of Exhibit A hereto.
Lender and Lenders shall have the meaning assigned to such terms in the preliminary statement of this Agreement.
Letter-of-Credit Right shall have the meaning given that term in the UCC and shall also mean any right to payment or performance under a letter of credit, whether or not the beneficiary has demanded, or is at the time entitled to demand, payment or performance.
Letters of Credit shall have the meaning given that term in the UCC.
Payment Intangible shall have the meaning given that term in the UCC and shall also mean any General Intangible under which the Account Debtors primary obligation is a monetary obligation.
Permitted Dispositions shall mean any transfer, disposition or asset sale not prohibited by Section 7.05 of the Credit Agreement.
Permitted Liens shall mean Liens permitted pursuant to the terms of Section 7.01 of the Credit Agreement.
Proceeds shall mean proceeds, as defined in the UCC, and shall also mean each type of property described in the definition of Collateral.
Secured Obligations shall mean, collectively, the Obligations (as defined in the Credit Agreement).
Securities Act shall have the meaning assigned to such term in Section 6.01 of this Agreement.
Securities Account shall have the meaning given that term in the UCC.
Securities Account Control Agreement shall mean, when used with respect to a Securities Account, a Securities Account Control Agreement among the relevant Securities Intermediary, the relevant Grantor and the Collateral Agent to the effect that such Securities Intermediary will comply with Entitlement Orders originated by the Collateral Agent with respect to such Securities Account without further consent by the relevant Grantor.
Securities Intermediary shall have the meaning given that term in the UCC.
Security shall have the meaning given that term in the UCC.
Security Entitlement shall have the meaning given that term in the UCC.
Security Interest shall have the meaning assigned to such term in Section 2.01 of this Agreement.
Software shall have the meaning given that term in the UCC.
Supporting Obligation shall have the meaning given that term in the UCC and shall also refer to a Letter-of-Credit Right or secondary obligation that supports the payment or performance of an Account, Chattel Paper, a Document, a General Intangible, an Instrument, or Investment Property.
Term Priority Cash Collateral Account shall mean a Deposit Account established pursuant to Section 2.03(b) of the Credit Agreement.
Term Priority Collateral shall have the meaning assigned to such term in the Intercreditor Agreement.
Voting Equity Interests shall mean, with respect to any Person, the Equity Interests of all classes (or equivalent interests) which ordinarily, in the absence of contingencies, entitle holders thereof to vote for the election of directors (or Persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such contingency.
SECTION 1.03 Rules of Interpretation. The rules of interpretation specified in Sections 1.02 through 1.06 of the Credit Agreement shall be applicable to this Agreement.
ARTICLE 2
Security Interest
SECTION 2.01 Security Interest. As security for the payment or performance, as the case may be, in full of the Secured Obligations, each Grantor hereby grants to the Collateral Agent, its successors and permitted assigns, for its own benefit and the benefit of the other Credit Parties, a security interest in all of such Grantors right, title and interest in, to and under the Collateral (the Security Interest). Without limiting the foregoing, each Grantor hereby designates the Collateral Agent as such Grantors true and lawful attorney, exercisable by the Collateral Agent whether or not an Event of Default exists, with full power of substitution, at the Collateral Agents option, to file one or more Financing Statements, continuation statements, or to sign other documents for the purpose of perfecting, confirming, continuing, or protecting the Security Interest granted by each Grantor, without the signature of any Grantor (each Grantor hereby appointing the Collateral Agent as such Persons attorney to sign such Persons name to any such instrument or document, whether or not an Event of Default exists), and naming any Grantor or the Grantors, as debtors, and the Collateral Agent, as secured party. Any such Financing Statement may indicate the Collateral as all assets of the Grantor, all personal property of the debtor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC.
SECTION 2.02 No Assumption of Liability. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Credit Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral.
ARTICLE 3
Representations and Warranties
The Grantors jointly and severally represent and warrant to the Collateral Agent and the other Credit Parties that:
SECTION 3.01 Title and Authority. Each Grantor has good and valid rights in, and title to, the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person, other than any consent or approval which has been obtained.
SECTION 3.02 Filings. Upon the filing of UCC Financing Statements naming each Grantor as debtor and the Collateral Agent as secured party and containing a description of the Collateral in the office of the Secretary of State in the jurisdiction of organization of each Grantor and the filing of the Intellectual Property Security Agreement with the United States Patent and Trademark Office and United States Copyright Office, the Security Interest granted to the Collateral Agent (for its own benefit and the benefit of the other Credit Parties) hereunder in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States shall constitute a legal, valid and perfected security interest in the Collateral, and no further or subsequent filing, refiling, recording, re-recording, registration or re-registration is necessary in any such jurisdiction, except as provided under applicable Law with respect to the filing of continuation statements or as a result of any change in a Grantors name or jurisdiction of incorporation or formation or under any other circumstances under which, pursuant to the UCC, filings previously made have become misleading or ineffective in whole or in part.
SECTION 3.03 Validity and Priority of Security Interest. The Security Interest constitutes (a) a legal and valid security interest in all of the Collateral securing the payment and performance of the Secured Obligations, (b) subject to the making of the filings described in Section 3.02 above, a perfected security interest in all of the Collateral (to the extent perfection in the Collateral can be accomplished by such filing) and (c) subject to the obtaining of Control, a perfected security interest in all of the Collateral (to the extent perfection in the Collateral by Control is required hereunder). The Security Interest is and shall be prior to any other Lien on any of the Collateral, subject only to (i) with respect to the ABL Priority Collateral only, Liens securing the obligations of the Grantors with respect to the ABL Credit Facility, and (ii) other Permitted Liens having priority by operation of applicable Law.
SECTION 3.04 Absence of Other Liens. The Collateral is owned by the Grantors free and clear of any Lien, except for (i) Permitted Liens or (ii) Liens for which termination statements or releases (or payoff letters providing for the delivery or filing of termination statements or releases) have been delivered to the Collateral Agent. Except, in each case, for Permitted Liens, the Grantors have not (a) filed or consented to the filing of (i)
any Financing Statement or analogous document under the UCC or any other applicable Law covering any Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, or (b) entered into any agreement in which any Grantor grants Control over any Collateral, which Financing Statement, control agreement or analogous document, assignment, security agreement or similar instrument is still in effect.
SECTION 3.05 Commercial Tort Claims. As of the date hereof, none of the Collateral consists of a Commercial Tort Claim having an individual value in excess of $1,000,000, except as set forth on Schedule 3.05 hereto.
SECTION 3.06 Instruments and Chattel Paper. As of the date hereof, no amounts payable under or in connection with any of the Collateral are evidenced by any Instrument or Chattel Paper with an individual face value in excess of $500,000 (or, with respect to all such Instruments or Chattel Paper, an aggregate face value in excess of $2,000,000), other than such Instruments and Chattel Paper listed in Schedule 3.06 hereto. Each Instrument and each item of Chattel Paper listed in Schedule 3.06 hereto has been properly endorsed, assigned and delivered to the Collateral Agent, accompanied by instruments of transfer or assignment duly executed in blank.
SECTION 3.07 Deposit Accounts, Securities Accounts and Commodity Accounts.
(a) As of the date hereof, no Grantor has any Deposit Accounts, Securities Accounts or Commodity Accounts other than those listed in Schedule 3.07 hereto.
(b) So long as the Collateral Agent has Control of a Controlled Deposit Account, the Lien of the Collateral Agent on such Controlled Deposit Account will be perfected, subject to no other Liens or rights of others (except Liens and rights of the relevant Depositary Bank that are Permitted Liens and the Lien of the ABL Collateral Agent).
(c) So long as the Financial Asset underlying any Security Entitlement owned by any Grantor is credited to a Controlled Securities Account, (i) the Collateral Agents Lien on such Security Entitlement will be perfected, subject to no other Liens or rights of others (except Liens and rights of the relevant Securities Intermediary that are Permitted Liens and the Lien of the ABL Collateral Agent), (ii) the Collateral Agent will have Control of such Security Entitlement and (iii) no action based on an adverse claim to such Security Entitlement or such Financial Asset, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may be asserted against the Collateral Agent or any other Credit Party.
(d) So long as any Commodity Account is subject to a Commodity Account Control Agreement, (i) the Liens on such Commodity Account and all Commodity Contracts carried therein will be perfected, subject to no other Liens or rights of others (except Liens and rights of the relevant Commodity Intermediary that are Permitted Liens and the Lien of the ABL Collateral Agent) and (ii) the Collateral Agent will have Control of such Commodity Account and all Commodity Contracts carried therein from time to time.
SECTION 3.08 Electronic Chattel Paper and Transferable Records. As of the date hereof, no amount under or in connection with any of the Collateral is evidenced by any Electronic Chattel Paper or any transferable record (as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act, as in effect in any relevant jurisdiction) with an individual face value in excess of $500,000 (or, with respect to all such Electronic Chattel Paper or transferable records, an aggregate face value in excess of $2,000,000), other than such Electronic Chattel Paper and transferable records listed in Schedule 3.08 hereto.
ARTICLE 4
Covenants
SECTION 4.01 Change of Name; Location of Collateral; Records; Place of Business.
(a) Each Grantor will furnish to the Collateral Agent at least ten (10) Business Days prior written notice (or such shorter period as to which the Collateral Agent in its sole discretion agrees) of any change in: (i) any Grantors name; (ii) any Grantors organizational structure or jurisdiction of incorporation or formation; (iii) any Grantors Federal Taxpayer Identification Number or organizational identification number, if any, assigned to it by its state of organization; or (iv) the location of any Grantors chief executive office. Each Grantor agrees not to effect or permit any change referred to in clauses (i) or (ii) of the preceding sentence unless all filings, publications and registrations have been made under the UCC or other applicable Law that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral (subject only to (i) with respect to the ABL Priority Collateral only, Liens securing the obligations of the Grantors with respect to the ABL Credit Facility, and (ii) other Permitted Liens having priority by operation of applicable Law) for its own benefit and the benefit of the other Credit Parties.
(b) Each Grantor agrees (i) to maintain, at its own cost and expense, records with respect to the Collateral owned by it which are complete and accurate in all material respects and which are consistent with its current practices, but in any event to include accounting records which are complete in all material respects indicating all payments and proceeds received with respect to any part of the Collateral, and (ii) at such time or times as the Collateral Agent may reasonably
request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Collateral.
SECTION 4.02 Protection of Security. Each Grantor shall, at its own cost and expense, take any and all actions reasonably necessary to defend title to the Collateral against all Persons and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien (other than Permitted Liens).
SECTION 4.03 Further Assurances. Subject to the Intercreditor Agreement, each Grantor agrees, at its own expense, to execute, acknowledge and deliver all such further documents, Financing Statements, agreements and instruments and take all such further actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby or the validity or priority of such Security Interest, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any Financing Statements or other documents in connection herewith or therewith. Without limiting the foregoing, each Grantor agrees, at its own expense, to execute, acknowledge and deliver all such further documents, Financing Statements, agreements and instruments and take all such further actions as the Collateral Agent may from time to time reasonably request to perfect the Collateral Agents Security Interest in all Collateral and the Proceeds therefrom (including causing the Collateral Agent to have Control of any such Collateral to the extent required hereunder and to the extent perfection in such Collateral can be accomplished by Control).
SECTION 4.04 Inspection and Verification. Each Grantor shall, and shall cause each of its Subsidiaries to, permit representatives and independent contractors of the Collateral Agent and each Lender to visit its properties and inspect the Collateral and all records related thereto (and to make extracts and copies from such records), to discuss its affairs, finances and accounts with its directors, officers and independent public accountants, and to conduct appraisals, commercial finance examinations and other evaluations, all in accordance with and subject to the terms and conditions of Section 6.10 of the Credit Agreement. The Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right to verify the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral, including, in the case of Accounts or Collateral in the possession of any third Person, by contacting Account Debtors or the third Person possessing such Collateral for the purpose of making such a verification. The Collateral Agent shall have the right, subject to the confidentiality provisions of Section 11.07 of the Credit Agreement, to share any information it gains from such inspection or verification with any Credit Party. The Grantors shall pay the reasonable and documented in reasonable detail fees and expenses of the Collateral Agent or such other Persons with respect to such inspections and verifications to the extent required by the terms of Section 6.10 of the Credit Agreement.
SECTION 4.05 Taxes; Encumbrances. At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other
encumbrances at any time levied or placed on the Collateral (other than Permitted Liens), and may take any other action which the Collateral Agent may reasonably deem necessary or desirable to repair, maintain or preserve any of the Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that the Collateral Agent shall not have any obligation to undertake any of the foregoing and shall have no liability on account of any action so undertaken except where a court of competent jurisdiction determines by final and nonappealable judgment that the Collateral Agents actions constitute gross negligence or willful misconduct; provided further that the making of any such payments or the taking of any such action by the Collateral Agent shall not be deemed to constitute a waiver of any Default or Event of Default arising from the Grantors failure to have made such payments or taken such action. Nothing in this Section 4.05 shall be interpreted as excusing any Grantor from the performance of any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.
SECTION 4.06 Assignment of Security Interest. Upon the occurrence and during the continuance of an Event of Default, and at the reasonable request of the Collateral Agent, if during such time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account with a value in excess of $250,000 (or, with respect to all such property, an aggregate value in excess of $1,000,000), such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of, and transferees from, the Account Debtor or other Person granting the security interest.
SECTION 4.07 Continuing Obligations of the Grantors. Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each material contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, unless the failure to observe and perform any such conditions and obligations shall not result in a breach of any such material contract, agreement or instrument.
SECTION 4.08 [Reserved].
SECTION 4.09 Limitation on Modification of Accounts. None of the Grantors will, without the Collateral Agents prior written consent, grant any extension of the time of payment of any of the Accounts, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, except, in each case, for extensions, releases, credits, discounts, compromises or settlements granted or made in the ordinary course of business or consistent with its current practices.
SECTION 4.10 Insurance.
(a) Each Grantor shall (i) maintain or shall cause to be maintained such insurance as is required pursuant to Section 6.07 of the Credit Agreement; and (ii) furnish to the Collateral Agent such information as to the insurance carried as the Collateral Agent may reasonably request from time to time.
(b) Each Grantor hereby irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantors true and lawful agent (and attorney-in-fact), exercisable only after the occurrence and during the continuance of an Event of Default, for the purpose of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or in part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Default or Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this Section 4.10(b), including reasonable attorneys fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Secured Obligations secured hereby.
SECTION 4.11 Commercial Tort Claims. If any Grantor shall at any time hold or acquire a Commercial Tort Claim for which a complaint has been filed in a court of competent jurisdiction having a value in excess of $1,000,000, such Grantor shall promptly (but, in any event, within ten (10) Business Days) notify the Collateral Agent in writing of the details thereof, and the Grantors shall take such actions as the Collateral Agent shall reasonably request in order to grant to the Collateral Agent, for the ratable benefit of the Credit Parties, a perfected security interest therein and in the Proceeds thereof.
SECTION 4.12 Legend. Upon the occurrence and during the continuance of an Event of Default, and at the reasonable request of the Collateral Agent, each Grantor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, its Accounts and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts have been assigned to the Collateral Agent, for its own benefit and the benefit of the other Credit Parties, and that the Collateral Agent has a security interest therein.
SECTION 4.13 Other Actions. In order to further ensure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Collateral Agents Security Interest in the Collateral, each Grantor covenants and agrees, in each case at such Grantors own expense, to take the following actions with respect to the following Collateral:
(a) If any amount then payable under or in connection with any of the Collateral shall become evidenced by any Instrument or Chattel Paper with an individual face value in excess of $500,000 (or, with respect to all such Instruments or Chattel Paper, an aggregate face value in excess of $2,000,000), other than such Instruments and Chattel Paper listed in Schedule 3.08 hereto, the Grantor acquiring such Instrument or Chattel Paper shall promptly (but, in any event, within ten (10) Business Days after receipt thereof) endorse, assign and deliver the same (i) if the same constitutes Proceeds of the Term Priority Collateral, to the Collateral Agent (with copies to the ABL Collateral Agent), and (ii) if the same constitutes ABL Priority Collateral, to the ABL Collateral Agent (with copies to the Collateral Agent), accompanied by such instruments of transfer or assignment duly executed in blank as the ABL Collateral Agent or the Collateral Agent may from time to time specify.
(b) Subject to the provisions of Section 5.01, no Grantor shall hereafter establish and maintain any Deposit Account, Securities Account or Commodity Account with any Depositary Bank, Securities Intermediary or Commodity Intermediary unless (i) such Depositary Bank, Securities Intermediary or Commodity Intermediary shall be reasonably acceptable to the Collateral Agent, and (ii) such Depositary Bank, Securities Intermediary or Commodity Intermediary, as the case may be, and such Grantor shall have duly executed and delivered a Deposit Account Control Agreement, Security Account Control Agreement or Commodity Account Control Agreement, as the case may be, with respect to such Deposit Account, Securities Account or Commodity Account, as the case may be. Each Grantor shall accept any cash and Investment Property in trust for the benefit of the Collateral Agent and promptly after actual receipt thereof (within a reasonable period of time not to exceed five (5) Business Days), deposit any and all cash and Investment Property received by it into a Controlled Deposit Account, a Controlled Commodity Account or a Controlled Securities Account. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any entitlement orders or instructions or directions to any issuer of uncertificated securities, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by such Grantor, unless an Event of Default has occurred and is continuing or would occur after giving effect to any such investment and withdrawal rights. The provisions of this Section 4.13(b) shall not apply to (a) any Excluded Account and (b) any Financial Assets credited to a Securities Account for which the Collateral Agent is the Securities Intermediary. No Grantor shall grant Control over any Investment Property comprised of Equity Interests in any Subsidiary to any person other than the Collateral Agent or the ABL Collateral Agent.
(c) As between the Collateral Agent and the Grantors, the Grantors shall bear the investment risk with respect to the Investment Property and Pledged Securities (as that term is defined in the Pledge Agreement), and the risk of loss of, damage to, or the destruction of, the Investment Property and Securities (except where a court of competent jurisdiction determines by final and nonappealable judgment that such loss, damage or destruction has resulted from the gross negligence or willful
misconduct of the Collateral Agent), whether in the possession of, or maintained as a Security Entitlement or deposit by, or subject to the Control of, the Collateral Agent, a Securities Intermediary, a Commodity Intermediary, any Grantor or any other Person.
(d) If any amount payable under or in connection with any of the Collateral shall become evidenced by any Electronic Chattel Paper or any transferable record with an individual face value in excess of $500,000 (or, with respect to all such Electronic Chattel Paper or transferable records, an aggregate face value in excess of $2,000,000), other than such Electronic Chattel Paper and transferable records listed in Schedule 3.10 hereto, the Grantor acquiring such Electronic Chattel Paper or transferable record shall promptly notify (i) if such amount payable constitutes Proceeds of the Term Priority Collateral, the Collateral Agent (with copies to the ABL Collateral Agent) thereof, and (ii) if such amount payable constitutes Proceeds of the ABL Priority Collateral, the ABL Collateral Agent (with copies to the Collateral Agent) thereof, and, in each case, shall take such action as the applicable Collateral Agent may reasonably request to vest in such Collateral Agent Control of such Electronic Chattel Paper under Section 9-105 of the UCC or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with each Grantor that the Collateral Agent will arrange, pursuant to procedures satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agents loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.
(e) If any Grantor is at any time a beneficiary under a Letter of Credit (other than a Letter of Credit constituting a Supporting Obligation) now or hereafter issued having a face value in an amount in excess of $500,000 (or with respect to all such Letters of Credit, having an aggregate face value in an amount in excess of $2,000,000), such Grantor shall promptly notify the Collateral Agent thereof and such Grantor shall, at the request of the Collateral Agent, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such Letter of Credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the Letter of Credit and to cause the proceeds of any drawing under such Letter of Credit to be paid directly to the Collateral Agent after the occurrence and during the continuance of an Event of Default, or (ii) arrange for the Collateral Agent to become the transferee beneficiary of such Letter of Credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the Letter of Credit are to be paid directly to the
Collateral Agent after the occurrence and during the continuance of any an Event of Default and applied as provided in the Credit Agreement.
(f) Prior to the satisfaction of the Discharge of ABL Obligations, with respect to any obligation under this Agreement, any other Collateral Document, or the Credit Agreement to deliver possession or control of any Collateral on which there is a Second Priority Lien by the Collateral Agent, such obligation shall be deemed satisfied by the delivery of possession or control of such Collateral to the Collateral Agent for the ABL Credit Facility (holding for the benefit of the Collateral Agent for the Credit Parties).
SECTION 4.15 Joinder of Additional Grantors. Upon the formation or acquisition of any new direct or indirect Subsidiary (other than any Unrestricted Subsidiary, a CFC or a Subsidiary that is held directly or indirectly by a CFC) by any Grantor, then the Grantors shall, at the Grantors expense, cause such Subsidiary to execute and deliver to the Collateral Agent a Joinder Agreement substantially in the form of Exhibit A hereto and to comply with the requirements of Section 6.12 of the Credit Agreement, within the time periods specified therein, and, upon such execution and delivery, such Subsidiary shall constitute a Grantor for all purposes hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of such Joinder Agreement shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.
ARTICLE 5
Deposit Accounts; Securities Accounts;
Commodity Accounts; Power of Attorney
SECTION 5.01 Deposit Accounts.
(a) Within 90 days after the Closing Date (or, in the case of any Person that thereafter becomes a Grantor, on the date on which such Person signs and delivers its Joinder Agreement), each Grantor shall, with respect to each Deposit Account then maintained by it, enter into (and cause the relevant Depositary Bank to enter into) a Deposit Account Control Agreement in respect of such Deposit Account and shall deliver such Deposit Account Control Agreement to the Collateral Agent (which shall enter into the same). All cash owned by each Grantor shall have been deposited, or after receipt thereof (within a reasonable period of time not to exceed three (3) Business Days) shall be deposited, in one or more Controlled Deposit Accounts (including, if and to the extent required under the Credit Agreement, the Term Priority Cash Collateral Account), in each case with a Depositary Bank the jurisdiction of which (determined as provided in UCC Section 9-304) shall at all times be a jurisdiction in which Article 9 of the UCC is in effect.
(b) Notwithstanding the foregoing, the Grantors have the right not to comply with the requirements of preceding clause (a) with respect to Deposit Accounts (other than any Term Priority Cash Collateral Account) that are Excluded Accounts, provided, however, that if an Event of Default occurs and is continuing, the Collateral Agent may terminate the foregoing right not to comply, by giving at least 10 Business Days notice of such termination to the relevant Grantors or (b) until the Discharge of ABL Obligations (as such term is defined in the Intercreditor Agreement).
(b) If a Term Priority Cash Collateral Account is required at any time to be established, the relevant Grantor shall, concurrently with establishment thereof, enter into (and cause the relevant Depositary Bank to enter into) a Deposit Account Control Agreement in respect of such Term Priority Cash Collateral Account and shall deliver such Deposit Account Control Agreement to the Collateral Agent (which shall enter into the same).
SECTION 5.02 Security Accounts; Commodity Accounts.
(a) Within 90 days after the Closing Date (or, in the case of any Person that thereafter becomes a Grantor, on the date on which such Person signs and delivers its Joinder Agreement), each Grantor shall enter into (and cause the relevant Securities Intermediary to enter into) a Securities Account Control Agreement in respect of each Security Entitlement owned by such Grantor and the Securities Account to which the underlying Financial Asset is credited and deliver such Securities Account Control Agreement to the Collateral Agent (which shall enter into the same). Thereafter, whenever such Grantor acquires any other Security Entitlement, such Grantor shall, as promptly as practicable, cause the underlying Financial Asset to be credited to a Controlled Securities Account.
(b) Within 90 days after the Closing Date (or, in the case of any Person that thereafter becomes a Grantor, on the date on which such Person signs and delivers a Joinder Agreement), each Grantor shall enter into (and cause the relevant Commodity Intermediary to enter into) a Commodity Account Control Agreement in respect of each Commodity Account owned by such Grantor and shall deliver such Commodity Account Control Agreement to the Collateral Agent (which shall enter into the same). Thereafter, such Grantor shall cause each Commodity Contract owned by it to be carried at all times in a Controlled Commodity Account.
SECTION 5.03 Power of Attorney. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantors true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for each Grantor and in each Grantors name or otherwise, for the use and benefit of the Collateral Agent and the other Credit Parties, (a) at any time, whether or not a Default or Event of Default has occurred, to take actions required to be taken by the Grantors under Section 2.01 of this Agreement, (b) upon the occurrence and during the continuance of an Event of Default
or as otherwise permitted under the Credit Agreement, (i) to take actions required to be taken by the Grantors under Section 5.01 of this Agreement; and (ii) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof, and (c) upon the occurrence and during the continuance of an Event of Default or as otherwise permitted under the Credit Agreement, (i) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (ii) to sign the name of any Grantor on any invoices, schedules of Collateral, freight or express receipts, or bills of lading storage receipts, warehouse receipts or other documents of title relating to any of the Collateral; (iii) to sign the name of any Grantor on any notice to such Grantors Account Debtors; (iv) to sign the name of any Grantor on any proof of claim in bankruptcy against Account Debtors, and on notices of lien, claims of mechanics liens, or assignments or releases of mechanics liens securing the Accounts; (v) to sign change of address forms to change the address to which each Grantors mail is to be sent to such address as the Collateral Agent shall designate; (vi) to receive and open each Grantors mail, remove any Proceeds of Collateral therefrom and turn over the balance of such mail either to the Borrower or to any trustee in bankruptcy or receiver of a Grantor, or other legal representative of a Grantor whom the Collateral Agent reasonably determines to be the appropriate person to whom to so turn over such mail; (vii) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (viii) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (ix) to take all such action as may be reasonably necessary to obtain the payment of any letter of credit and/or bankers acceptance of which any Grantor is a beneficiary; (x) to repair, manufacture, assemble, complete, package, deliver, alter or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any customer of any Grantor; (xi) to use, license or transfer any or all General Intangibles of any Grantor, subject to those restrictions to which such Grantor is subject under applicable Law and by contract; and (xii) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things reasonably necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent was the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any other Credit Party to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any other Credit Party, or to present or file any claim or notice. It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Grantors for the purposes set forth above is coupled with an interest and is irrevocable.
SECTION 5.04 No Obligation to Act. The Collateral Agent shall not be obligated to do any of the acts or to exercise any of the powers authorized by Section 5.03, but if the Collateral Agent elects to do any such act or to exercise any of such powers, it shall not be accountable for more than it actually receives as a result of such exercise of power, and shall not be responsible to any Grantor for any act or omission to act, except where a court of competent jurisdiction determines by final and nonappealable judgment that the subject act or
omission to act has resulted from the gross negligence or willful misconduct of the Collateral Agent. The provisions of Section 5.03 shall in no event relieve any Grantor of any of its obligations hereunder or under any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any other Credit Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any other Credit Party of any other or further right which it may have on the date of this Agreement or hereafter, whether hereunder, under any other Loan Document, by applicable Law or otherwise.
ARTICLE 6
Remedies
SECTION 6.01 Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, it is agreed that the Collateral Agent shall have in any jurisdiction in which enforcement hereof is sought, in addition to all other rights and remedies, the rights and remedies of a secured party under the UCC or other applicable Law. The rights and remedies of the Collateral Agent shall include, without limitation, the right to take any or all of the following actions at the same or different times:
(a) With respect to any Collateral consisting of Accounts, General Intangibles (including Payment Intangibles), Letter-of-Credit Rights, Instruments, Chattel Paper, Documents, and Investment Property, the Collateral Agent may collect the Collateral with or without the taking of possession of any of the Collateral.
(b) With respect to any Collateral consisting of Accounts, the Collateral Agent may: (i) demand, collect and receive any amounts relating thereto, as the Collateral Agent may determine; (ii) commence and prosecute any actions in any court for the purposes of collecting any such Accounts and enforcing any other rights in respect thereof; (iii) defend, settle or compromise any action brought and, in connection therewith, give such discharges or releases as the Collateral Agent may reasonably deem appropriate; (iv) without limiting the Collateral Agents rights set forth in Section 5.03 hereof, receive, open mail addressed to any Grantor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or other instruments or documents evidencing payment, shipment or storage of the goods giving rise to such Accounts or securing or relating to such Accounts, on behalf of and in the name of such Grantor; and (v) sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any such Accounts or the goods or services which have given rise thereto, as fully and completely as though the Collateral Agent was the absolute owner thereof for all purposes.
(c) With respect to any Collateral consisting of Investment Property, the Collateral Agent may, upon notice to any Grantor: (i) exercise all rights of any Grantor with respect thereto, including without limitation, the right to exercise all voting and corporate rights at any meeting of the shareholders of the Issuer (as defined in the Pledge Agreement) of any Investment Property and to exercise any and all rights of
conversion, exchange, subscription or any other rights, privileges or options pertaining to any Investment Property as if the Collateral Agent was the absolute owner thereof, including the right to exchange, at its discretion, any and all of any Investment Property upon the merger, consolidation, reorganization, recapitalization or other readjustment of the Issuer thereof, all without liability except to account for property actually received as provided in Section 5.04 hereof; (ii) transfer such Collateral at any time to itself, or to its nominee, and receive the income thereon and hold the same as Collateral hereunder or apply it to the Secured Obligations; and (iii) demand, sue for, collect or make any compromise or settlement it deems desirable. The Grantors recognize that (a) the Collateral Agent may be unable to effect a public sale of all or a part of the Investment Property by reason of certain prohibitions contained in the Securities Act of 1933, 15 U.S.C. §77, (as amended and in effect, the Securities Act) or the Securities laws of various states (the Blue Sky Laws), but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Investment Property for their own account, for investment and not with a view to the distribution or resale thereof, (b) that private sales so made may be at prices and upon other terms less favorable to the seller than if the Investment Property were sold at public sales, (c) that neither the Collateral Agent nor any other Credit Party has any obligation to delay sale of any of the Investment Property for the period of time necessary to permit the Investment Property to be registered for public sale under the Securities Act or the Blue Sky Laws, and (d) that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner, provided that such sales are conducted in accordance with applicable Law. Notwithstanding anything herein to the contrary, no Grantor shall be required to register, or cause the registration of, any Investment Property under the Securities Act or any Blue Sky Laws.
(d) With respect to any Collateral consisting of Inventory, the Collateral Agent and/or representatives and independent contractors of the Collateral Agent may, but shall not be obligated to, repair, manufacture, assemble, complete, package, deliver, alter or supply any work-in-process Inventory, if any, necessary to fulfill in whole or in part the purchase order of any customer of any Grantor, all at the expense of the Grantors.
(e) With respect to any Collateral consisting of Inventory, Goods, and Equipment, the Collateral Agent may conduct one or more going out of business sales, in the Collateral Agents own right or by one or more agents and contractors. Such sale(s) may be conducted upon any premises owned, leased, or occupied by any Grantor. The Collateral Agent and any such agent or contractor, in conjunction with any such sale, may augment the Inventory with other goods (all of which other goods shall remain the sole property of the Collateral Agent or such agent or contractor). Any amounts realized from the sale of such goods which constitute augmentations to the Inventory (net of an allocable share of the costs and expenses incurred in their disposition) shall be the sole property of the Collateral Agent or such agent or contractor and neither any Grantor nor any Person claiming under or in right of any
Grantor shall have any interest therein. Each purchaser at any such going out of business sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor.
(f) With or without legal process and with or without prior notice or demand for performance, the Collateral Agent may enter upon, occupy, and use any premises owned or occupied by each Grantor, and may exclude the Grantors from such premises or portion thereof as may have been so entered upon, occupied, or used by the Collateral Agent. The Collateral Agent shall not be required to remove any of the Collateral from any such premises upon the Collateral Agents taking possession thereof, and may render any Collateral unusable to the Grantors. In no event shall the Collateral Agent be liable to any Grantor for use or occupancy by the Collateral Agent of any premises pursuant to this Section 6.01(f), nor for any charge (such as wages for the Grantors employees and utilities) incurred in connection with the Collateral Agents exercise of the Collateral Agents Rights and Remedies (as defined herein) hereunder, other than for direct or actual damages resulting from the gross negligence or willful misconduct of the Collateral Agent as determined by a final and nonappealable judgment of a court of competent jurisdiction.
(g) The Collateral Agent may require any Grantor to assemble the Collateral and make it available to the Collateral Agent at the Grantors sole risk and expense at a place or places which are reasonably convenient to both the Collateral Agent and such Grantor.
(h) Each Grantor agrees that the Collateral Agent shall have the right, subject to applicable Law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. Each Grantor further agrees that any such sale of all or any part of the Collateral consisting of Inventory for consideration in an amount equal to the balance of the purchase price (minus any customer deposits previously collected by such Grantor) shall be commercially reasonable. Each purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor.
(i) Unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Collateral Agent shall provide the Grantors such advance notice as may be practicable under the circumstances), the Collateral Agent shall give the Grantors at least ten (10) days prior written notice, by authenticated record, of the date, time and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made. Each Grantor agrees that such written notice shall satisfy all requirements for notice to that Grantor which are imposed under the UCC or other applicable Law with respect to the exercise of the Collateral Agents Rights and Remedies upon default. The Collateral Agent shall not be obligated to make any sale or other disposition of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale or other disposition of such Collateral shall
have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned.
(j) Any public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale. At any sale or other disposition, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. If any of the Collateral is sold, leased, or otherwise disposed of by the Collateral Agent on credit, the Secured Obligations shall not be deemed to have been reduced as a result thereof unless and until payment in full is received thereon by the Collateral Agent. In the event that the purchaser fails to pay for the Collateral, the Collateral Agent may resell the Collateral and apply the proceeds from such resale in accordance with the terms of Section 6.02 of this Agreement.
(k) At any public (or, to the extent permitted by applicable Law, private) sale made pursuant to this Section 6.01, the Collateral Agent or any other Credit Party may bid for or purchase, free (to the extent permitted by applicable Law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor, the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to the Collateral Agent or such other Credit Party from any Grantor on account of the Secured Obligations as a credit against the purchase price, and the Collateral Agent or such other Credit Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor.
(l) For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof. The Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full.
(m) As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver.
(n) To the extent permitted by applicable Law, each Grantor hereby waives all rights of redemption, stay, valuation and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.
SECTION 6.02 Application of Proceeds. After the occurrence and during the continuance of an Event of Default and acceleration of the Secured Obligations, the Collateral Agent shall apply the proceeds of any collection or sale of the Collateral, as well as any Collateral consisting of cash, or any Collateral granted under any other of the Collateral Documents, in accordance with Section 8.03 of the Credit Agreement.
The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale or other disposition of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale or other disposition shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold or otherwise disposed of and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.
ARTICLE 7
Perfection of Security Interest
SECTION 7.01 Perfection by Filing. This Agreement constitutes an authenticated record, and each Grantor hereby authorizes the Collateral Agent, pursuant to the provisions of Section 2.01 and Section 5.03, to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral, in such filing offices as the Collateral Agent shall reasonably deem appropriate, and the Grantors shall pay the Collateral Agents reasonable costs and expenses incurred in connection therewith.
SECTION 7.02 Other Perfection, Etc. The Grantors shall at any time and from time to time take such steps as the Collateral Agent may reasonably request for the Collateral Agent (a) to the extent required by this Agreement or the Credit Agreement, to obtain Control of any Investment Property, Deposit Accounts, Letter-of-Credit Rights or Electronic Chattel Paper, with any agreements establishing Control to be in form and substance reasonably satisfactory to the Collateral Agent and (b) otherwise to insure the continued perfection of the Collateral Agents security interest in any of the Collateral with the priority described in Section 3.03 and of the preservation of its rights therein.
SECTION 7.03 Savings Clause. Nothing contained in this Article 7 shall be construed to narrow the scope of the Collateral Agents Security Interest in any of the Collateral or the perfection or priority thereof or to impair or otherwise limit any of the Collateral Agents Rights and Remedies hereunder except (and then only to the extent) as mandated by the UCC.
ARTICLE 8
Miscellaneous
SECTION 8.01 Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 11.02 of the Credit Agreement.
SECTION 8.02 Grant of Non-Exclusive License. Without limiting the provisions of Section 6.01 hereof or any other rights of the Collateral Agent as the holder of a Lien on any IP Collateral (as defined in the Intellectual Property Security Agreement), each Grantor, subject to those restrictions to which such Grantor is subject under applicable Law and by contract, hereby grants to the Collateral Agent, and the representatives and independent contractors of the Collateral Agent, a royalty free, non-exclusive, irrevocable license, to use, apply, and affix any trademark, trade name, logo, or the like in which any Grantor now or hereafter has rights, such license to be effective only upon the occurrence and during the continuance of any Event of Default in connection with the Collateral Agents exercise of the Collateral Agents Rights and Remedies hereunder including, without limitation, in connection with any completion of the manufacture of Inventory or any sale or other disposition of Inventory. The license granted in this Section 8.02 shall remain in full force and effect throughout the term of this Agreement, notwithstanding the release of any Grantor hereunder.
SECTION 8.03 Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document, or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from the Guaranty or any other guarantee, securing or guaranteeing all or any of the Secured Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Secured Obligations or this Agreement.
SECTION 8.04 Survival of Agreement. All covenants, agreements, representations and warranties made by the Grantors herein and in any other Loan Document and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Credit Parties and shall survive the execution and delivery of this Agreement and the other Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Collateral Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect unless terminated in accordance with Section 8.14 hereof.
SECTION 8.05 Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party, and all covenants, promises and agreements by or on behalf of the Grantors that are contained in this Agreement shall bind and inure to the benefit of each Grantor and its respective successors and permitted assigns. This Agreement shall be binding upon each Grantor and the Collateral Agent and their respective successors and permitted assigns, and shall inure to the benefit of each Grantor, the Collateral Agent and the other Credit Parties and their respective successors and permitted assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such attempted assignment or transfer shall be void) except as expressly permitted by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.
SECTION 8.06 Collateral Agents Fees and Expenses; Indemnification.
(a) Without limiting or duplicating any of their obligations under the Credit Agreement, the Guaranty or the other Loan Documents, the Grantors jointly and severally agree to pay all reasonable and documented in reasonable detail out-of-pocket expenses incurred by the Collateral Agent, including the reasonable fees, charges and disbursements of a single counsel and any outside consultants for the Collateral Agent, in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the Collateral Agents Rights and Remedies hereunder or (iv) the failure of any Grantor to perform or observe any of the provisions hereof.
(b) Without limiting or duplicating any of their indemnification obligations under the Credit Agreement, the Guaranty or the other Loan Documents, the Grantors shall jointly and severally indemnify the Credit Parties and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable and documented in reasonable detail fees, charges and disbursements of a single counsel for all Indemnitees taken as a whole in each relevant jurisdiction material to the interests of the Lenders, in each case, selected by the Collateral Agent and solely in the case of an actual conflict of interest between Indemnitees where the Indemnitees affected by such conflict inform the Borrower of such conflict, one additional counsel in each relevant jurisdiction material to the interest of the Lenders to each group of affected Indemnitees taken as a whole) incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Grantor arising out of, in connection with, or as a result of, (i) the preparation, execution, delivery or administration of this Agreement, the Credit Agreement, any other Loan Document or any other agreement or instrument contemplated hereby or thereby or any amendment or waiver with respect hereto or
thereto, the performance by the parties hereto of their respective obligations hereunder or thereunder, or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Collateral Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement, the Credit Agreement and the other Loan Documents, or (ii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Grantor, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by any Grantor against an Indemnitee for breach in bad faith of such Indemnitees obligations hereunder or under any other Loan Document, if such Grantor has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.
(c) To the fullest extent permitted by applicable Law, the Grantors shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, the Credit Agreement, any other Loan Document or any agreement or instrument contemplated hereby, or the transactions contemplated hereby or thereby. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement, the Credit Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.
(d) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Security Documents. All amounts due under this Section 8.06 shall be payable not later than ten (10) Business Days after receipt of an invoice or demand therefor.
(e) The agreements in this Section 8.06 shall survive the resignation of the Collateral Agent, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Secured Obligations.
SECTION 8.07 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.08 Waivers; Amendment.
(a) The rights, remedies, powers, privileges, and discretions of the Collateral Agent hereunder (herein, the Collateral Agents Rights and Remedies) shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by the Collateral Agent in exercising or enforcing any of the Collateral Agents Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver by the Collateral Agent of any Event of Default or of any Default under any other agreement shall operate as a waiver of any other Event of Default or other Default hereunder or under any other agreement. No single or partial exercise of any of the Collateral Agents Rights or Remedies, and no express or implied agreement or transaction of whatever nature entered into between the Collateral Agent and any Person, at any time, shall preclude the other or further exercise of the Collateral Agents Rights and Remedies. No waiver by the Collateral Agent of any of the Collateral Agents Rights and Remedies on any one occasion shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver. The Collateral Agents Rights and Remedies may be exercised at such time or times and in such order of preference as the Collateral Agent may determine. The Collateral Agents Rights and Remedies may be exercised without resort or regard to any other source of satisfaction of the Secured Obligations. No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Grantor or Grantors with respect to whom such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 11.01 of the Credit Agreement.
SECTION 8.09 WAIVER OF JURY TRIAL. 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 8.09.
SECTION 8.10 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 8.11 Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 8.12 Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
SECTION 8.13 Jurisdiction; Waiver of Venue; Consent to Service of Process.
(a) EACH OF THE GRANTORS 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 COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR 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. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE COLLATERAL AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AGAINST ANY OF THE GRANTORS OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(b) EACH OF THE GRANTORS 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 (A) OF THIS SECTION. 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.
(c) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 8.01. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
SECTION 8.14 Termination; Release of Collateral.
(a) Any Lien upon any Collateral will be released automatically if the Collateral constitutes property being sold, transferred or disposed of in a Permitted Disposition to a Person that is not a Grantor. Upon at least two (2) Business Days prior written request by the Grantors, the Collateral Agent shall execute such documents as may be necessary to evidence the release of the Liens upon any Collateral described in this Section 8.14(a); provided, however, that (i) the Collateral Agent shall not be required to execute any such document on terms which, in its reasonable opinion, would, under applicable Law, expose the Collateral Agent to liability or entail any adverse consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Secured Obligations or any Liens (other than those expressly being released) upon (or obligations of any Grantor in respect of) all interests retained by any Grantor, including, without limitation, the Proceeds of any sale, all of which shall continue to constitute part of the Collateral.
(b) Except for those provisions which expressly survive the termination thereof, this Agreement and the Security Interest granted herein shall terminate when (i) the Commitments have expired or been terminated and (ii) all of the Secured Obligations have been paid in full in cash or otherwise satisfied (other than any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement or the Credit Agreement), at which time the Collateral Agent shall execute and deliver to the Grantors, at the Grantors expense, all UCC termination statements, releases and similar documents that the Grantors shall reasonably request to evidence such termination; provided, however, that the Credit Agreement, this
Agreement, and the Security Interest granted herein shall be reinstated if at any time payment, or any part thereof, of any Secured Obligation is rescinded or must otherwise be restored by any Credit Party upon the bankruptcy or reorganization of any Grantor. Any execution and delivery of termination statements, releases or other documents pursuant to this Section 8.14 shall be without recourse to, or warranty by, the Collateral Agent or any other Credit Party.
SECTION 8.15 Conflict. In the event of a conflict between this Agreement and the Pledge Agreement, the terms of the Pledge Agreement shall control with respect to the Pledged Collateral (as defined in the Pledge Agreement) and the terms of this Agreement shall control with respect to all other Collateral. In the event of a conflict between this Agreement and the Intellectual Property Security Agreement, the terms of the Intellectual Property Security Agreement shall control with respect to the IP Collateral (as defined in the Intellectual Property Security Agreement) and the terms of this Agreement shall control with respect to all other Collateral.
SECTION 8.16 Intercreditor Agreement. Notwithstanding anything herein to the contrary, the Lien and Security Interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and the terms of this Agreement, the terms of the Intercreditor Agreement shall govern and control.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
GRANTORS: |
BORROWER: | ||
|
| ||
|
THE CONTAINER STORE, INC. | ||
|
| ||
|
By: |
/s/ Melissa Reiff | |
|
Name: |
Melissa Reiff | |
|
Title: |
President | |
|
| ||
|
| ||
|
GUARANTORS: | ||
|
TCS HOLDINGS, INC., as Holdings | ||
|
| ||
|
| ||
|
By: |
/s/ Melissa Reiff | |
|
Name: |
Melissa Reiff | |
|
Title: |
President | |
|
| ||
|
| ||
|
TCS GIFT CARD SERVICES, LLC, | ||
|
as Subsidiary Guarantor | ||
|
| ||
|
| ||
|
By: |
/s/ Melissa Reiff | |
|
Name: |
Melissa Reiff | |
|
Title: |
President | |
|
| ||
|
| ||
|
TCS INSTALLATION SERVICES, LLC, | ||
|
as Subsidiary Guarantor | ||
|
| ||
|
| ||
|
By: |
/s/ Melissa Reiff | |
|
Name: |
Melissa Reiff | |
|
Title: |
President | |
[Signature Page to Security Agreement]
COLLATERAL AGENT: |
JPMORGAN CHASE BANK, N.A. | |
|
| |
|
| |
|
By: |
/s/ David L. Howard |
|
|
Name: David L. Howard |
|
|
Title: Authorized Officer |
[Signature Page to Security Agreement]
SCHEDULE I
Guarantors
TCS Holdings, Inc.
TCS Gift Card Services, LLC
TCS Installation Services, LLC
SCHEDULE 3.05
Commercial Tort Claims
None.
SCHEDULE 3.06
Instruments and Chattel Paper
(i) Promissory Notes:
Promissory Note, dated April 6, 2012, in the original principal amount of $2,267,941.68 made by Elfa International AB (successor in interest to Elfa Group AB) for the benefit of The Container Store, Inc. This note is set to mature on June 30, 2012 and as of February 25, 2012 the remaining principal balance is $409,489.44.
Promissory Note, dated April 6, 2012, in the original principal amount of $712,500 made by Elfa International AB (successor in interest to Elfa Group AB) for the benefit of The Container Store, Inc. This note is set to mature on June 30, 2012 and as of February 25, 2012 the remaining balance is $128,645.81.
(ii) Chattel Paper:
None.
SCHEDULE 3.07
Deposit Accounts, Securities Accounts and Commodity Accounts
* Excluded Account
(z) zero balance account
(b) account used for benefit payments
(c) controlled disbursement account
Store# |
|
Location or |
|
Bank |
|
Bank Acct # |
|
Bank Acct ABA # |
|
Cash/GL |
|
City |
|
State |
Store Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19005 |
|
AUS |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Austin |
|
TX |
19006 |
|
SAN |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
San Antonio |
|
TX |
19007 |
|
HOU |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Houston |
|
TX |
19008 |
|
FTW |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Fort Worth |
|
TX |
19010 |
|
BUC |
|
Wells Fargo |
|
*4945361673 (z) |
|
121000248 |
|
1098 |
|
Atlanta |
|
GA |
19011 |
|
TYC |
|
Wells Fargo |
|
*4945361681(z) |
|
121000248 |
|
1098 |
|
Vienna |
|
VA |
19012 |
|
OAB |
|
JP Morgan Chase Bank, N.A. |
|
*1032382 (z) |
|
71000013 |
|
1055 |
|
Oak Brook |
|
IL |
19013 |
|
ROC |
|
Wells Fargo |
|
*4945361699 (z) |
|
121000248 |
|
1098 |
|
Rockville |
|
MD |
19014 |
|
SCH |
|
JP Morgan Chase Bank, N.A. |
|
*1032382 (z) |
|
71000013 |
|
1055 |
|
Schaumburg |
|
IL |
19015 |
|
NOR |
|
JP Morgan Chase Bank, N.A. |
|
*1032382 (z) |
|
71000013 |
|
1055 |
|
Northbrook |
|
IL |
19016 |
|
CSD |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Coppell |
|
TX |
19017 |
|
SOC |
|
Wells Fargo |
|
*4945361707 (z) |
|
121000248 |
|
1098 |
|
Costa Mesa |
|
CA |
19018 |
|
PKM |
|
JP Morgan Chase Bank, N.A. |
|
*192647848 (z) |
|
102001017 |
|
1065 |
|
Denver |
|
CO |
19019 |
|
PER |
|
Wells Fargo |
|
*4945361715 (z) |
|
121000248 |
|
1098 |
|
Atlanta |
|
GA |
19020 |
|
CHI |
|
JP Morgan Chase Bank, N.A. |
|
*1032382 (z) |
|
71000013 |
|
1055 |
|
Chicago |
|
IL |
19021 |
|
SDG |
|
Wells Fargo |
|
*4945361723 (z) |
|
121000248 |
|
1098 |
|
San Diego |
|
CA |
Store# |
|
Location or |
|
Bank |
|
Bank Acct # |
|
Bank Acct ABA # |
|
Cash/GL |
|
City |
|
State |
19022 |
|
NPK |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Dallas |
|
TX |
19023 |
|
GAL |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Dallas |
|
TX |
19024 |
|
MIA |
|
Wells Fargo |
|
*495361731 (z) |
|
121000248 |
|
1098 |
|
Miami |
|
FL |
19025 |
|
CHP |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Houston |
|
TX |
19026 |
|
WHP |
|
JP Morgan Chase Bank, N.A. |
|
*304179531 (z) |
|
21000021 |
|
1082 |
|
White Plains |
|
NY |
19027 |
|
SLK |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Southlake |
|
TX |
19028 |
|
COL |
|
JP Morgan Chase Bank, N.A. |
|
*629608787 (z) |
|
44000037 |
|
1090 |
|
Columbus |
|
OH |
19029 |
|
WAC |
|
Wells Fargo |
|
*4945361749 (z) |
|
121000248 |
|
1098 |
|
Walnut Creek |
|
CA |
19030 |
|
AVA |
|
Wells Fargo |
|
*4945361756 (z) |
|
121000248 |
|
1098 |
|
Arlington |
|
VA |
19031 |
|
COM |
|
Wells Fargo |
|
*4945361764 (z) |
|
121000248 |
|
1098 |
|
Corte Madera |
|
CA |
19032 |
|
PAR |
|
JP Morgan Chase Bank, N.A. |
|
*304179531 (z) |
|
21000021 |
|
1082 |
|
Paramus |
|
NJ |
19033 |
|
SFO |
|
Wells Fargo |
|
*4945361772 (z) |
|
121000248 |
|
1098 |
|
San Francisco |
|
CA |
19034 |
|
SJO |
|
Wells Fargo |
|
*4945361780 (z) |
|
121000248 |
|
1098 |
|
San Jose |
|
CA |
19035 |
|
6AV |
|
JP Morgan Chase Bank, N.A. |
|
*304179531 (z) |
|
21000021 |
|
1082 |
|
New York |
|
NY |
19036 |
|
WDC |
|
Wells Fargo |
|
*4945361798 (z) |
|
121000248 |
|
1098 |
|
Washington |
|
DC |
19037 |
|
PAS |
|
Wells Fargo |
|
*4945361806 (z) |
|
121000248 |
|
1098 |
|
Pasadena |
|
CA |
19038 |
|
CHH |
|
Wells Fargo |
|
*4945361814 (z) |
|
121000248 |
|
1098 |
|
Chestnut Hill |
|
MA |
19039 |
|
NAT |
|
Wells Fargo |
|
*4945361822 (z) |
|
121000248 |
|
1098 |
|
Natick |
|
MA |
19040 |
|
POR |
|
Wells Fargo |
|
*4945361830 (z) |
|
121000248 |
|
1098 |
|
Tigard |
|
OR |
19041 |
|
BEL |
|
Wells Fargo |
|
*4945361848 (z) |
|
121000248 |
|
1098 |
|
Bellevue |
|
WA |
19042 |
|
LEX |
|
JP Morgan Chase Bank, N.A. |
|
*304179531 (z) |
|
21000021 |
|
1082 |
|
New York |
|
NY |
19043 |
|
CEN |
|
Wells Fargo |
|
*4945361855 (z) |
|
121000248 |
|
1098 |
|
Los Angeles |
|
CA |
19044 |
|
STL |
|
Wells Fargo |
|
*4945361863 (z) |
|
121000248 |
|
1098 |
|
St. Louis |
|
MO |
19045 |
|
CCR |
|
JP Morgan Chase Bank, N.A. |
|
*192647848 (z) |
|
102001017 |
|
1065 |
|
Denver |
|
CO |
19046 |
|
CHL |
|
Wells Fargo |
|
*4945361871 (z) |
|
121000248 |
|
1098 |
|
Charlotte |
|
NC |
Store# |
|
Location or |
|
Bank |
|
Bank Acct # |
|
Bank Acct ABA # |
|
Cash/GL |
|
City |
|
State |
19047 |
|
LTR |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Little Rock |
|
AR |
19048 |
|
SCT |
|
JP Morgan Chase Bank, N.A. |
|
*192647848 (z) |
|
102001017 |
|
1065 |
|
Scottsdale |
|
AZ |
19049 |
|
STN |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Frisco |
|
TX |
19051 |
|
MIN |
|
Wells Fargo |
|
*4945361889 (z) |
|
121000248 |
|
1098 |
|
Fairview |
|
TX |
19052 |
|
CIN |
|
JP Morgan Chase Bank, N.A. |
|
*629608787 (z) |
|
44000037 |
|
1090 |
|
Cinncinatti |
|
OH |
19053 |
|
FLT |
|
JP Morgan Chase Bank, N.A. |
|
*192647848 (z) |
|
102001017 |
|
1065 |
|
Flat Iron |
|
CO |
19054 |
|
HAL |
|
Wells Fargo |
|
*4945408763 (z) |
|
121000248 |
|
1098 |
|
Hallandale |
|
FL |
19055 |
|
RAL |
|
Wells Fargo |
|
*4947120531 (z) |
|
121000248 |
|
1098 |
|
Raleigh |
|
NC |
19056 |
|
IND |
|
JP Morgan Chase Bank, N.A |
|
*1032382 (z) |
|
071000013 |
|
1055 |
|
Indianapolis |
|
IN |
19057 |
|
CHR |
|
Wells Fargo |
|
*4948908702 (z) |
|
121000248 |
|
1098 |
|
Charlotte |
|
NC |
19058 |
|
NSH |
|
Wells Fargo |
|
*4947417432 (z) |
|
121000248 |
|
1098 |
|
Nashville |
|
TN |
19059 |
|
WDL |
|
JP Morgan Chase Bank, N.A |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
The Woodlands |
|
TX |
19060 |
|
ATX |
|
JP Morgan Chase Bank, N.A |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Arlington |
|
TX |
Main Operating Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCS Master Acct |
|
JP Morgan Chase Bank, N.A. |
|
1588849834 |
|
111000614 |
|
1025 |
|
Dallas |
|
TX |
|
|
Cash Disb |
|
JP Morgan Chase Bank, N.A. |
|
*9319960630 (z), (c) |
|
111300880 |
|
1026 |
|
Dallas |
|
TX |
|
|
Payroll |
|
JP Morgan Chase Bank, N.A. |
|
*9319960622 (z), (c) |
|
111000614 |
|
1110 |
|
Dallas |
|
TX |
|
|
Amex |
|
JP Morgan Chase Bank, N.A. |
|
*645589250 (z) |
|
111000614 |
|
1022 |
|
Dallas |
|
TX |
|
|
V/MC |
|
JP Morgan Chase Bank, N.A. |
|
*645589268 (z) |
|
111000614 |
|
1087 |
|
Dallas |
|
TX |
|
|
DSCV |
|
JP Morgan Chase Bank, N.A. |
|
*1588849842 (z) |
|
111000614 |
|
1085 |
|
Dallas |
|
TX |
|
|
GPA Flex |
|
JP Morgan Chase Bank, N.A. |
|
*638476341 (z), (b) |
|
111000614 |
|
1140 |
|
Dallas |
|
TX |
|
|
GPA Health Bene |
|
JP Morgan Chase Bank, N.A. |
|
*638476358 (z), (b) |
|
111000614 |
|
1145 |
|
Dallas |
|
TX |
|
|
TCS ACH Wire |
|
JP Morgan Chase Bank, N.A. |
|
*734228026 (z) |
|
111000614 |
|
1027 |
|
Dallas |
|
TX |
Store# |
|
Location or |
|
Bank |
|
Bank Acct # |
|
Bank Acct ABA # |
|
Cash/GL |
|
City |
|
State |
|
|
Depository Master |
|
JP Morgan Chase Bank, N.A. |
|
734228018 |
|
124001545 |
|
1028 |
|
Dallas |
|
TX |
|
|
Depository Master |
|
Wells Fargo |
|
4121764674 |
|
121000248 |
|
1098 |
|
Dallas |
|
TX |
|
|
Pcard |
|
Wells Fargo |
|
4000045914 |
|
121000248 |
|
1095 |
|
Dallas |
|
TX |
|
|
TCS Gift Card |
|
JP Morgan Chase Bank, N.A. |
|
663001261 |
|
111000614 |
|
1094 |
|
Dallas |
|
TX |
|
|
PT Insurance |
|
JP Morgan Chase Bank, N.A. |
|
*826080111 (z), (b) |
|
520101023 |
|
1146 |
|
Dallas |
|
Tx |
|
|
TCS GiftCo |
|
JP Morgan Chase Bank, N.A. |
|
918033705 |
|
111000614 |
|
1093 |
|
Dallas |
|
Tx |
|
|
TCS Installation Payroll |
|
JP Morgan Chase Bank, N.A. |
|
*428297456 (z), (c) |
|
111000614 |
|
1111 |
|
Dallas |
|
Tx |
|
|
TCS Installation Master |
|
JP Morgan Chase Bank, N.A. |
|
428297399 |
|
111000614 |
|
1112 |
|
Dallas |
|
Tx |
|
|
SF HRA account |
|
JP Morgan Chase Bank, N.A. |
|
*790198485 (z), (b) |
|
111000614 |
|
1147 |
|
Dallas |
|
Tx |
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
|
|
DFW (CAP ACCOUNTS) |
|
|
|
|
|
142 488 951 7 |
|
|
|
|
|
6011 0170 1743 658 |
|
|
|
|
|
654467 |
|
|
|
|
|
|
5 |
|
AUS |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 497 447 5 |
|
645589250 |
|
1211 |
|
6011 0179 9096 266 |
|
1588849842 |
|
1212 |
|
687897 |
|
645589268 |
|
1210 |
|
1235 |
6 |
|
SAN |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 483 815 9 |
|
645589250 |
|
1211 |
|
6011 0170 1743 799 |
|
1588849842 |
|
1212 |
|
688374 |
|
645589268 |
|
1210 |
|
1235 |
7 |
|
HOU |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 441 613 9 |
|
645589250 |
|
1211 |
|
6011 0170 1746 727 |
|
1588849842 |
|
1212 |
|
688382 |
|
645589268 |
|
1210 |
|
1235 |
8 |
|
FTW |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 558 006 5 |
|
645589250 |
|
1211 |
|
6011 0170 1746 743 |
|
1588849842 |
|
1212 |
|
688390 |
|
645589268 |
|
1210 |
|
1235 |
9 |
|
CCK |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 420 958 3 |
|
645589250 |
|
1211 |
|
6011 0170 1746 768 |
|
1588849842 |
|
1212 |
|
688754 |
|
645589268 |
|
1210 |
|
1235 |
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
10 |
|
BUC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
410 443 271 1 |
|
645589250 |
|
1211 |
|
6011 0170 1746 784 |
|
1588849842 |
|
1212 |
|
688762 |
|
645589268 |
|
1210 |
|
1235 |
11 |
|
TYC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
445 446 908 1 |
|
645589250 |
|
1211 |
|
6011 0170 1983 213 |
|
1588849842 |
|
1212 |
|
688796 |
|
645589268 |
|
1210 |
|
1235 |
12 |
|
OAB |
|
JP Morgan Chase Bank, N.A. |
|
071000013 |
|
312 470 141 8 |
|
645589250 |
|
1211 |
|
6011 0170 2523 265 |
|
1588849842 |
|
1212 |
|
688804 |
|
645589268 |
|
1210 |
|
1235 |
13 |
|
ROC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
219 480 234 4 |
|
645589250 |
|
1211 |
|
6011 0170 2615 517 |
|
1588849842 |
|
1212 |
|
688812 |
|
645589268 |
|
1210 |
|
1235 |
14 |
|
SCH |
|
JP Morgan Chase Bank, N.A. |
|
071000013 |
|
312 473 309 8 |
|
645589250 |
|
1211 |
|
6011 0170 2831 676 |
|
1588849842 |
|
1212 |
|
688820 |
|
645589268 |
|
1210 |
|
1235 |
15 |
|
NOR |
|
JP Morgan Chase Bank, N.A. |
|
071000013 |
|
312 473 308 0 |
|
645589250 |
|
1211 |
|
6011 0170 2831 684 |
|
1588849842 |
|
1212 |
|
688879 |
|
645589268 |
|
1210 |
|
1235 |
16 |
|
CSD |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 473 529 8 |
|
645589250 |
|
1211 |
|
6011 0170 2790 807 |
|
1588849842 |
|
1212 |
|
687905 |
|
645589268 |
|
1210 |
|
|
17 |
|
SOC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 519 211 9 |
|
645589250 |
|
1211 |
|
6011 0179 9088 172 |
|
1588849842 |
|
1212 |
|
689042 |
|
645589268 |
|
1210 |
|
1235 |
18 |
|
DEN |
|
JP Morgan Chase Bank, N.A. |
|
102001017 |
|
105 472 849 8 |
|
645589250 |
|
1211 |
|
6011 0170 4351 350 |
|
1588849842 |
|
1212 |
|
689059 |
|
645589268 |
|
1210 |
|
1235 |
19 |
|
PER |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
410 474 030 3 |
|
645589250 |
|
1211 |
|
6011 0170 4249 265 |
|
1588849842 |
|
1212 |
|
689083 |
|
645589268 |
|
1210 |
|
1235 |
20 |
|
CHI |
|
JP Morgan Chase Bank, N.A. |
|
071000013 |
|
312 308 971 6 |
|
645589250 |
|
1211 |
|
6011 0170 4661 485 |
|
1588849842 |
|
1212 |
|
689091 |
|
645589268 |
|
1210 |
|
1235 |
21 |
|
SDG |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 346 657 2 |
|
645589250 |
|
1211 |
|
6011 0170 4683 216 |
|
1588849842 |
|
1212 |
|
689109 |
|
645589268 |
|
1210 |
|
1235 |
22 |
|
NPK |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 328 125 2 |
|
645589250 |
|
1211 |
|
6011 0170 4845 351 |
|
1588849842 |
|
1212 |
|
689315 |
|
645589268 |
|
1210 |
|
1235 |
23 |
|
GAL |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 345 014 7 |
|
645589250 |
|
1211 |
|
6011 0170 5247 946 |
|
1588849842 |
|
1212 |
|
689356 |
|
645589268 |
|
1210 |
|
1235 |
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
24 |
|
MIA |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
409 557 231 9 |
|
645589250 |
|
1211 |
|
6011 0170 5324 638 |
|
1588849842 |
|
1212 |
|
689364 |
|
645589268 |
|
1210 |
|
1235 |
25 |
|
CHP |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 507 785 6 |
|
645589250 |
|
1211 |
|
6011 0173 8494 838 |
|
1588849842 |
|
1212 |
|
689596 |
|
645589268 |
|
1210 |
|
1235 |
26 |
|
WHP |
|
JP Morgan Chase Bank, N.A. |
|
021000021 |
|
631 002 047 4 |
|
645589250 |
|
1211 |
|
6011 0170 5001 301 |
|
1588849842 |
|
1212 |
|
689604 |
|
645589268 |
|
1210 |
|
1235 |
27 |
|
SLK |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 049 336 3 |
|
645589250 |
|
1211 |
|
6011 0178 5061 068 |
|
1588849842 |
|
1212 |
|
689687 |
|
645589268 |
|
1210 |
|
1235 |
28 |
|
COL |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
334 016 213 0 |
|
645589250 |
|
1211 |
|
6011 0171 5478 523 |
|
1588849842 |
|
1212 |
|
689695 |
|
645589268 |
|
1210 |
|
1235 |
29 |
|
WAC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 197 740 6 |
|
645589250 |
|
1211 |
|
6011 0177 5854 852 |
|
1588849842 |
|
1212 |
|
689703 |
|
645589268 |
|
1210 |
|
1235 |
30 |
|
AVA |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
445 017 742 3 |
|
645589250 |
|
1211 |
|
6011 0177 5854 845 |
|
1588849842 |
|
1212 |
|
689729 |
|
645589268 |
|
1210 |
|
1235 |
31 |
|
COM |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 605 014 2 |
|
645589250 |
|
1211 |
|
6011 0170 9933 111 |
|
1588849842 |
|
1212 |
|
689737 |
|
645589268 |
|
1210 |
|
1235 |
32 |
|
PAR |
|
JP Morgan Chase Bank, N.A. |
|
021000021 |
|
229 033 605 6 |
|
645589250 |
|
1211 |
|
6011 0170 9955 445 |
|
1588849842 |
|
1212 |
|
689745 |
|
645589268 |
|
1210 |
|
1235 |
33 |
|
SFO |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 826 366 9 |
|
645589250 |
|
1211 |
|
6011 0170 9860 330 |
|
1588849842 |
|
1212 |
|
689752 |
|
645589268 |
|
1210 |
|
1235 |
34 |
|
SJO |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 902 175 1 |
|
645589250 |
|
1211 |
|
6011 0178 5060 342 |
|
1588849842 |
|
1212 |
|
689885 |
|
645589268 |
|
1210 |
|
1235 |
35 |
|
6AV |
|
JP Morgan Chase Bank, N.A. |
|
021000021 |
|
631 178 122 3 |
|
645589250 |
|
1211 |
|
6011 0178 5060 359 |
|
1588849842 |
|
1212 |
|
848994 |
|
645589268 |
|
1210 |
|
1235 |
36 |
|
WDC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
408 006 912 3 |
|
645589250 |
|
1211 |
|
6011 0179 9700 362 |
|
1588849842 |
|
1212 |
|
70681 |
|
645589268 |
|
1210 |
|
1235 |
37 |
|
PAS |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
104 009 203 3 |
|
645589250 |
|
1211 |
|
6011 0170 1900 373 |
|
1588849842 |
|
1212 |
|
78495 |
|
645589268 |
|
1210 |
|
1235 |
38 |
|
CHH |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
220 055 264 4 |
|
645589250 |
|
1211 |
|
6011 0170 1900 381 |
|
1588849842 |
|
1212 |
|
80023 |
|
645589268 |
|
1210 |
|
1235 |
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
39 |
|
NAT |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
220 063 909 4 |
|
645589250 |
|
1211 |
|
6011 0170 2024 678 |
|
1588849842 |
|
1212 |
|
89535 |
|
645589268 |
|
1210 |
|
1235 |
40 |
|
POR |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
536 044 064 8 |
|
645589250 |
|
1211 |
|
6011 0170 2073 477 |
|
1588849842 |
|
1212 |
|
91812 |
|
645589268 |
|
1210 |
|
1235 |
41 |
|
BEL |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
546 069 085 2 |
|
645589250 |
|
1211 |
|
6011 0170 2174 101 |
|
1588849842 |
|
1212 |
|
103301 |
|
645589268 |
|
1210 |
|
1235 |
42 |
|
LEX |
|
JP Morgan Chase Bank, N.A. |
|
021000021 |
|
631 367 074 7 |
|
645589250 |
|
1211 |
|
6011 0170 2174 085 |
|
1588849842 |
|
1212 |
|
103287 |
|
645589268 |
|
1210 |
|
1235 |
43 |
|
CEN |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
104 216 119 0 |
|
645589250 |
|
1211 |
|
6011 0170 2612 258 |
|
1588849842 |
|
1212 |
|
119341 |
|
645589268 |
|
1210 |
|
1235 |
45 |
|
CCR |
|
JP Morgan Chase Bank, N.A. |
|
102001017 |
|
1051140010 |
|
645589250 |
|
1211 |
|
6011 0170 1743 658 |
|
1588849842 |
|
1212 |
|
168050 |
|
645589268 |
|
1210 |
|
1235 |
899 |
|
WEB |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 008 695 1 |
|
645589250 |
|
1211 |
|
6011 0179 9708 993 |
|
1588849842 |
|
1212 |
|
687913 |
|
645589268 |
|
1210 |
|
|
99 |
|
DFW |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 488 937 6 |
|
645589250 |
|
1211 |
|
6011 0170 1743 674 |
|
1588849842 |
|
1212 |
|
689877 |
|
645589268 |
|
1210 |
|
|
46 |
|
CHL |
|
Wells Fargo |
|
121000248 |
|
229 171 495 4 |
|
645589250 |
|
1211 |
|
6011 0170 5369 781 |
|
1588849842 |
|
1212 |
|
177483 |
|
645589268 |
|
1210 |
|
1235 |
47 |
|
LTR |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
103 039 307 8 |
|
645589250 |
|
1211 |
|
6011 0170 5391 512 |
|
1588849842 |
|
1212 |
|
10712 |
|
645589268 |
|
1210 |
|
1235 |
48 |
|
SCT |
|
JP Morgan Chase Bank, N.A |
|
102001017 |
|
502 144 950 9 |
|
645589250 |
|
1211 |
|
6011 0170 5440 327 |
|
1588849842 |
|
1212 |
|
15316 |
|
645589268 |
|
1210 |
|
1235 |
49 |
|
STN |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
142 897 580 9 |
|
645589250 |
|
1211 |
|
6011 0170 5428 074 |
|
1588849842 |
|
1212 |
|
7185 |
|
645589268 |
|
1210 |
|
1235 |
50 |
|
FVW |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
2420241879 |
|
645589250 |
|
1211 |
|
6011 0170 5547 485 |
|
1588849842 |
|
1212 |
|
62871 |
|
645589268 |
|
1210 |
|
1235 |
51 |
|
MIN |
|
Wells Fargo |
|
121000248 |
|
322 077 844 3 |
|
645589250 |
|
1211 |
|
6011 0170 5452 249 |
|
1588849842 |
|
1212 |
|
17983 |
|
645589268 |
|
1210 |
|
1235 |
52 |
|
CIN |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
334 182 253 4 |
|
645589250 |
|
1211 |
|
6011 0170 5452 231 |
|
1588849842 |
|
1212 |
|
17984 |
|
645589268 |
|
1210 |
|
1235 |
53 |
|
FLT |
|
JP Morgan Chase Bank, N.A |
|
102001017 |
|
105 143 011 4 |
|
645589250 |
|
1211 |
|
6011 0170 5487 988 |
|
1588849842 |
|
1212 |
|
23695 |
|
645589268 |
|
1210 |
|
1235 |
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
54 |
|
HAL |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
4099999518 |
|
645589250 |
|
1211 |
|
6011 0170 5540 951 |
|
1588849842 |
|
1212 |
|
59512 |
|
645589268 |
|
1210 |
|
1235 |
55 |
|
RAL |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
4321939696 |
|
645589250 |
|
1211 |
|
6011 0170 5560 454 |
|
1588849842 |
|
1212 |
|
68693 |
|
645589268 |
|
1210 |
|
1235 |
56 |
|
IND |
|
JP Morgan Chase Bank, N.A |
|
071000013 |
|
313 126 232 1 |
|
645589250 |
|
1211 |
|
6011 0170 5606 695 |
|
1588849842 |
|
1212 |
|
196660 |
|
645589268 |
|
1210 |
|
1235 |
57 |
|
CHR |
|
Wells Fargo |
|
121000248 |
|
432 218 922 6 |
|
645589250 |
|
1211 |
|
6011 0170 5606 703 |
|
1588849842 |
|
1212 |
|
196661 |
|
645589268 |
|
1210 |
|
1235 |
58 |
|
NSH |
|
Wells Fargo |
|
121000248 |
|
441 164 726 6 |
|
645589250 |
|
1211 |
|
6011 0170 5608 436 |
|
1588849842 |
|
1212 |
|
199225 |
|
645589268 |
|
1210 |
|
1235 |
59 |
|
WDL |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
242 160 126 1 |
|
645589250 |
|
1211 |
|
6011 0170 5608 444 |
|
1588849842 |
|
1212 |
|
201248 |
|
645589268 |
|
1210 |
|
1235 |
60 |
|
ATX |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
242 190 200 8 |
|
645589250 |
|
1211 |
|
6011 0170 5635 249 |
|
1588849842 |
|
1212 |
|
204400 |
|
645589268 |
|
1210 |
|
1235 |
SCHEDULE 3.08
Electronic Chattel Paper and Transferable Records
None.
EXHIBIT A
Form of Joinder Agreement
|
[Name of New Grantor] |
|
[Address of New Grantor] |
|
|
[Date] |
|
Ladies and Gentlemen:
Reference is made to (i) the Term Facility Security Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Term Facility Security Agreement), by and among The Container Store, Inc., a Texas corporation (the Borrower), each of the Persons listed on Schedule I therein (each such Person, individually, a Guarantor and, collectively, the Guarantors) (the Borrower and the Guarantors are hereinafter referred to, individually, as a Grantor and, collectively, as the Grantors), and JPMorgan Chase Bank, N.A., a national banking association, as collateral agent (in such capacity, the Collateral Agent) for its own benefit and the benefit of the other Credit Parties and (ii) the Term Facility Pledge Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Term Facility Pledge Agreement, together with the Term Facility Security Agreement, the Security Agreements), by and among the Borrower, the other Grantors, and the Collateral Agent for its own benefit and the benefit of the other Credit Parties. All capitalized terms used but not defined herein shall have the meanings set forth in the Security Agreements.
This Joinder Agreement supplements the Security Agreements and is delivered by the undersigned, [ ] (the New Grantor), pursuant to Section 4.15 of the Term Facility Security Agreement. The New Grantor hereby agrees to be bound as a Guarantor and as a Grantor party to the Security Agreements by all of the terms, covenants and conditions set forth in the Security Agreements to the same extent that it would have been bound if it had been a signatory to the Security Agreements on the date of the Security Agreements. Without limiting the generality of the foregoing, the New Grantor hereby grants and pledges to the Collateral Agent, its successors and permitted assigns, for its own benefit and the benefit of the other Credit Parties, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Pledged Collateral, a Lien on and security interest in, all of its right, title and interest in, to and under the Collateral and expressly assumes all obligations and liabilities of a Guarantor and Grantor under the Security Agreements. The New Grantor hereby makes each of the
representations and warranties and agrees to each of the covenants applicable to the Grantors contained in the Security Agreements.
Annexed hereto are supplements to each of the schedules to the Security Agreements with respect to the New Grantor. Such supplements shall be deemed to be part of the Security Agreements.
This Joinder Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement.
THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the New Grantor has caused this Joinder Agreement to be executed and delivered by its duly authorized officer as of the date first above written.
|
|
[NEW GRANTOR] | ||
|
|
| ||
|
|
| ||
|
|
By: |
| |
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AGREED TO AND ACCEPTED: |
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JPMORGAN CHASE BANK, N.A., |
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as Collateral Agent |
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By: |
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Name: |
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[Schedules to the Term Security Agreement and Term Pledge Agreement to be attached]
Exhibit 10.11
INTERCREDITOR AGREEMENT
by and between
JPMORGAN CHASE BANK, N.A.
as ABL Agent,
and
JPMORGAN CHASE BANK, N.A.
as Term Agent
Dated as of April 6, 2012
TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS |
2 | |
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Section 1.1 |
Uniform Commercial Code Definitions |
2 |
Section 1.2 |
Other Definitions |
2 |
Section 1.3 |
Rules of Construction |
12 |
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ARTICLE 2 LIEN PRIORITY |
13 | |
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Section 2.1 |
Priority of Liens |
13 |
Section 2.2 |
Waiver of Right to Contest Liens |
14 |
Section 2.3 |
Remedies Standstill |
14 |
Section 2.4 |
Exercise of Rights |
15 |
Section 2.5 |
No New Liens |
17 |
Section 2.6 |
Waiver of Marshalling |
18 |
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ARTICLE 3 ACTIONS OF THE PARTIES |
18 | |
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Section 3.1 |
Certain Actions Permitted |
18 |
Section 3.2 |
Agent for Perfection |
18 |
Section 3.3 |
Sharing of Information and Access |
19 |
Section 3.4 |
Insurance |
19 |
Section 3.5 |
No Additional Rights For the Loan Parties Hereunder |
19 |
Section 3.6 |
Inspection and Access Rights |
19 |
Section 3.7 |
Exercise of Remedies Set Off and Tracing of and Priorities in Proceeds |
20 |
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ARTICLE 4 APPLICATION OF PROCEEDS |
21 | |
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Section 4.1 |
Application of Proceeds |
21 |
Section 4.2 |
Specific Performance |
23 |
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ARTICLE 5 INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS |
23 | |
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Section 5.1 |
Notice of Acceptance and Other Waivers |
23 |
Section 5.2 |
Modifications to ABL Documents and Term Documents |
24 |
Section 5.3 |
Reinstatement and Continuation of Agreement |
26 |
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ARTICLE 6 INSOLVENCY PROCEEDINGS |
26 | |
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Section 6.1 |
DIP Financing |
26 |
Section 6.2 |
Relief From Stay |
27 |
Section 6.3 |
No Contest; Adequate Protection |
27 |
Section 6.4 |
Asset Sales |
28 |
Section 6.5 |
Separate Grants of Security and Separate Classification |
29 |
Section 6.6 |
Enforceability |
29 |
Section 6.7 |
ABL Obligations Unconditional |
29 |
Section 6.8 |
Term Obligations Unconditional |
30 |
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ARTICLE 7 MISCELLANEOUS |
30 | |
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Section 7.1 |
Rights of Subrogation |
30 |
Section 7.2 |
Further Assurances |
30 |
Section 7.3 |
Representations |
31 |
Section 7.4 |
Amendments |
31 |
Section 7.5 |
Addresses for Notices |
31 |
Section 7.6 |
No Waiver, Remedies |
32 |
Section 7.7 |
Continuing Agreement; Transfer of Secured Obligations |
32 |
Section 7.8 |
Governing Law; Entire Agreement |
32 |
Section 7.9 |
Counterparts |
33 |
Section 7.10 |
No Third Party Beneficiaries |
33 |
Section 7.11 |
Headings |
33 |
Section 7.12 |
Severability |
33 |
Section 7.13 |
Attorneys Fees |
33 |
Section 7.14 |
VENUE, JURY TRIAL WAIVER |
33 |
Section 7.15 |
Intercreditor Agreement |
34 |
Section 7.16 |
No Warranties or Liability |
34 |
Section 7.17 |
Conflicts |
34 |
Section 7.18 |
Information Concerning Financial Condition of the Loan Parties |
34 |
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT (as amended, supplemented, restated or otherwise modified from time to time pursuant to the terms hereof, this Agreement) is entered into as of April 6, 2012 between JPMORGAN CHASE BANK, N.A., in its capacities as administrative agent and collateral agent (together with its successors and assigns in such capacities, the ABL Agent) for the financial institutions party from time to time to the ABL Credit Agreement referred to below (such financial institutions, together with their successors, assigns and transferees, the ABL Credit Agreement Lenders and, together with affiliates thereof and certain other specified hedging parties, in their capacities as ABL Bank Products Affiliates or ABL Hedging Affiliates (in each case, as hereinafter defined), the ABL Lenders) and JPMORGAN CHASE BANK, N.A., in its capacities as administrative agent and collateral agent (together with its successors and assigns in such capacities, the Term Agent) for the financial institutions, lenders and investors party from time to time to the Term Credit Agreement referred to below (such financial institutions, lenders and investors, together with their respective successors, assigns and transferees, the Term Credit Agreement Lenders and, together with affiliates thereof and certain other specified hedging parties in their capacities as Term Bank Products Affiliates or Term Hedging Affiliates (in each case, as hereinafter defined), the Term Lenders).
RECITALS
A. Pursuant to that certain Credit Agreement dated as of the date hereof by and among The Container Store, Inc. (the ABL Borrower), the ABL Guarantors (as hereinafter defined), the ABL Credit Agreement Lenders and the ABL Agent (as such agreement may be amended, supplemented, restated or otherwise modified from time to time, the ABL Credit Agreement), the ABL Credit Agreement Lenders have agreed to make certain loans and other financial accommodations to or for the benefit of the ABL Borrower.
B. As a condition to the effectiveness of the ABL Credit Agreement and to secure the obligations of the ABL Borrower and the ABL Guarantors (the ABL Borrower, the ABL Guarantors and each other direct or indirect subsidiary or parent of the ABL Borrower or any of its affiliates that is now or hereafter becomes a party to any ABL Document, collectively, the ABL Loan Parties) under and in connection with the ABL Documents, the ABL Loan Parties have granted to the ABL Agent (for the benefit of the ABL Lenders) Liens on the Collateral.
C. Pursuant to that certain Credit Agreement dated as of the date hereof by and among The Container Store, Inc. (the Term Borrower). Holdings (as hereinafter defined), the other Term Guarantors (as hereinafter defined), the Term Lenders and the Term Agent (as such agreement may be amended, supplemented, restated or otherwise modified from time to time, the Term Credit Agreement), the Term Lenders have agreed to make certain term loans to the Term Borrower.
D. As a condition to the effectiveness of the Term Credit Agreement and to secure the obligations of the Term Borrower and the Term Guarantors (the Term Borrower, the Term Guarantors and each other direct or indirect subsidiary or parent of the Term Borrower or any of its affiliates that is now or hereafter becomes a party to any Term Document, collectively, the Term Loan Parties) under and in connection with the Term Documents, the Term Loan Parties have granted to the Term Agent (for the benefit of the Term Lenders) Liens on the Collateral.
E. Each of the ABL Agent (on behalf of the ABL Lenders) and the Term Agent (on behalf of the Term Lenders) and, by their acknowledgment hereof, the ABL Loan Parties and the Term Loan
Parties, desire to agree to the relative priority of Liens on the Collateral and certain other rights, priorities and interests as provided herein.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Uniform Commercial Code Definitions. The following terms which are defined in the Uniform Commercial Code are used herein as so defined: Accounts, Chattel Paper, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Financial Assets, Fixtures, Instruments, Inventory, Investment Property, Letter-Of-Credit Rights, Money, Payment Intangibles, Promissory Notes, Records, Security, Securities Accounts, Security Entitlements, Supporting Obligations and Tangible Chattel Paper.
Section 1.2 Other Definitions. Subject to Section 1.1 above, unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the ABL Credit Agreement and the Term Credit Agreement, in each case as in effect on the Closing Date. In addition, as used in this Agreement, the following terms shall have the meanings set forth below:
ABL Agent shall have the meaning assigned to that term in the introduction to this Agreement and shall include any successor thereto as well as any Person designated as the Agent or Administrative Agent under any ABL Credit Agreement.
ABL Bank Products Affiliate shall mean any ABL Credit Agreement Lender, any Affiliate of any ABL Credit Agreement Lender, any Former Lender or any Affiliate of a Former Lender that has entered into a Bank Products Agreement with an ABL Loan Party with the obligations of such ABL Loan Party thereunder being secured by one or more ABL Collateral Documents.
ABL Borrower shall have the meaning assigned to that term in the recitals to this Agreement.
ABL Collateral Documents shall mean all Collateral Documents as defined in the ABL Credit Agreement, and all other security agreements, mortgages, deeds of trust and other collateral documents executed and delivered in connection with the ABL Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time.
ABL Credit Agreement shall have the meaning assigned to that term in the recitals to this Agreement and shall include one or more other agreements or facilities extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of the ABL Obligations, whether by the same or any other agent, lender or group of lenders and whether or not increasing the amount of any Indebtedness that may be incurred thereunder.
ABL Credit Agreement Lenders shall have the meaning assigned to that term in the introduction to this Agreement.
ABL Documents shall mean the ABL Credit Agreement, the ABL Collateral Documents, any Bank Products Agreement between any ABL Loan Party and any ABL Bank Products Affiliate, any Hedging Agreements between any ABL Loan Party and any ABL Hedging Affiliate, those other ancillary agreements as to which the ABL Agent or any ABL Lender is a party or a beneficiary and all other agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any
ABL Loan Party or any of its respective Subsidiaries or Affiliates, and delivered to the ABL Agent, in connection with any of the foregoing or any ABL Loan Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time.
ABL Enforcement Date means the date which is 180 days after the occurrence of (i) an Event of Default (under and as defined in the ABL Credit Agreement) and (ii) the Term Agents receipt of an Enforcement Notice from the ABL Agent.
ABL Guarantors shall mean the collective reference to Holdings, each Restricted Subsidiary of the Borrower (other than any CFC, any Subsidiary owned directly or indirectly by a CFC and any Domestic Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of the assets of such Domestic Subsidiary consist of Equity Interests in one or more Foreign Subsidiaries) and each other Restricted Subsidiary of Holdings that is required to sign a counterpart to the ABL Credit Agreement pursuant to Section 6.12(a)(i) thereof.
ABL Hedging Affiliate shall mean any ABL Credit Agreement Lender, any Affiliate of any ABL Credit Agreement Lender, any Former Lender or any Affiliate of any Former Lender that has entered into a Hedging Agreement with an ABL Loan Party with the obligations of such ABL Loan Party thereunder being secured by one or more ABL Collateral Documents by an ABL Loan Party.
ABL Lenders shall have the meaning assigned to that term in the introduction to this Agreement and shall include all ABL Bank Product Affiliates and ABL Hedging Affiliates and all successors, assigns, transferees and replacements thereof, as well as any Person designated as a Lender under any ABL Credit Agreement.
ABL Loan Parties shall have the meaning assigned to that term in the recitals to this Agreement.
ABL Obligations shall mean all obligations of every nature of each ABL Loan Party from time to time owed to the ABL Agent, the ABL Lenders, or any of them, under any ABL Document (including in respect of Incremental Loans), whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such ABL Loan Party, would have accrued on any ABL Obligation, whether or not a claim is allowed against such ABL Loan Party for such interest in the related bankruptcy proceeding), reimbursement of amounts drawn under letters of credit, payments for early termination of Hedging Agreements, fees, expenses, indemnification or otherwise, and all other amounts owing or due under the terms of the ABL Documents, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time; provided that the portion of the ABL Obligations comprising the aggregate principal amount of outstanding loans or letter of credit reimbursement obligations in excess of $100,000,000 shall not constitute ABL Obligations.
ABL Priority Collateral shall mean all Collateral consisting of the following:
(1) all Accounts, other than Accounts which constitute identifiable proceeds of Term Priority Collateral;
(2) all Chattel Paper (including Tangible Chattel Paper and Electronic Chattel Paper), other than Chattel Paper which constitutes identifiable proceeds of Term Priority Collateral;
(3) all (x) Deposit Accounts (other than Term Loan Priority Accounts) and Money and all cash, checks, other negotiable instruments, funds and other evidences of payments
held therein, and (y) Securities Accounts (other than Term Loan Priority Accounts) and Security Entitlements and Securities credited thereto, and, in each case, all cash, checks and other property held therein or credited thereto; provided however that to the extent that identifiable proceeds of Term Priority Collateral are initially deposited in any such Deposit Accounts or Securities Accounts after the delivery of an Enforcement Notice, such identifiable proceeds shall be treated as Term Priority Collateral (provided further that transfers of amounts from a Deposit Account or Securities Account to another occurring after the delivery of an Enforcement Notice shall not be deemed to constitute a deposit of identifiable proceeds for purposes of this clause);
(4) all Inventory;
(5) to the extent relating to, evidencing or governing any of the items referred to in the preceding clauses (1) through (4) constituting ABL Priority Collateral, all Documents, General Intangibles (other than Intellectual Property), Instruments (including Promissory Notes) and commercial tort claims;
(6) to the extent relating to any of the items referred to in the preceding clauses (1) through (5) constituting ABL Priority Collateral, all Supporting Obligations and Letter-of- Credit Rights;
(7) all books and Records relating to the items referred to in the preceding clauses (1) through (6) constituting ABL Priority Collateral (including all books, databases, customer lists, engineer drawings, and Records, whether tangible or electronic, which contain any information relating to any of the items referred to in the preceding clauses (1) through (6)); and
(8) all collateral security and guarantees with respect to any of the foregoing and all cash, money, insurance proceeds, instruments, securities, financial assets and deposit accounts received as proceeds of any of the foregoing (such proceeds, ABL Priority Proceeds).
ABL Recovery shall have the meaning set forth in Section 5.3(a).
ABL Secured Parties shall mean the ABL Agent and the ABL Lenders.
Affiliate shall mean, with respect to a specified Person, any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with the Person specified.
Agent(s) means individually the ABL Agent or the Term Agent and collectively means both the ABL Agent and the Term Agent.
Agreement shall have the meaning assigned to that term in the introduction to this Agreement.
Bank Products shall have the meaning provided in the ABL Credit Agreement or the Term Credit Agreement as the context requires, in each case as in effect on the date hereof.
Bank Products Agreement shall mean any agreement pursuant to which a bank or other financial institution agrees to provide Bank Products and/or Cash Management Services.
Bankruptcy Code shall mean Title 11 of the United States Code.
Borrower shall mean the ABL Borrower and the Term Borrower, as applicable.
Capital Stock shall mean, as to any Person that is a corporation, the authorized shares of such Persons capital stock, including all classes of common, preferred, voting and nonvoting capital stock, and, as to any Person that is not a corporation or an individual, the membership or other ownership interests in such Person, including the right to share in profits and losses, the right to receive distributions of cash and other property, and the right to receive allocations of items of income, gain, loss, deduction and credit and similar items from such Person, whether or not such interests include voting or similar rights entitling the holder thereof to exercise Control over such Person, collectively with, in any such case, all warrants, options and other rights to purchase or otherwise acquire, and all other instruments convertible into or exchangeable for, any of the foregoing.
Cash Management Services shall have the meaning provided in the ABL Credit Agreement or Term Credit Agreement as the context requires, in each case as in effect on the date hereof.
Collateral shall mean all Property now owned or hereafter acquired by the Borrower or any Guarantor in or upon which a Lien is granted or purported to be granted to the ABL Agent or the Term Agent under any of the ABL Collateral Documents or the Term Collateral Documents, together with all rents, issues, profits, products and Proceeds thereof.
Control shall mean the possession, directly or indirectly, of the power (a) to vote 50% or more of the securities having ordinary voting power for the election of directors (or any similar governing body) of a Person, or (b) to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms Controlling and Controlled have meanings correlative thereto.
Control Collateral shall mean any Collateral consisting of any Certificated Security (as defined in Section 8-102 of the Uniform Commercial Code), Investment Property, Deposit Account, Instruments and any other Collateral as to which a Lien may be perfected through possession or control by the secured party, or any agent therefor.
Copyright Licenses shall mean with respect to any Loan Party, all written license agreements of such Loan Party providing for the grant by or to such Loan Party of any right to use any Copyright of such Loan Party, other than agreements with any Person who is an Affiliate or a Subsidiary of such Loan Party.
Copyrights shall mean with respect to any Loan Party, all of such Loan Partys right, title and interest in and to all United States and foreign copyrights, whether or not the underlying works of authorship have been published or registered, United States and foreign copyright registrations and copyright applications, and (a) all renewals thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof and (c) the right to sue or otherwise recover for past, present and future infringements and misappropriations thereof.
Credit Documents shall mean the ABL Documents and the Term Documents.
Debtor Relief Laws shall mean the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for 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 affecting the rights of creditors generally.
DIP Financing shall have the meaning set forth in Section 6.1(a).
Discharge of ABL Obligations shall mean (a) the payment in full in cash of all outstanding ABL Obligations excluding contingent indemnity obligations with respect to then unasserted claims but including, (i) with respect to amounts available to be drawn under outstanding letters of credit issued under any ABL Credit Agreement (or indemnities or other undertakings issued pursuant thereto in respect of outstanding letters of credit), the cancellation of such letters of credit or the delivery or provision of cash collateral or backstop letters of credit in respect thereof in compliance with the terms of any ABL Credit Agreement (which shall not exceed an amount equal to 105% of the aggregate undrawn amount of such letters of credit) and (ii) the termination of all Hedging Agreements between any ABL Loan Party and any ABL Hedging Affiliate and of all Bank Products Agreements between any ABL Loan Party and any ABL Bank Products Affiliate and payment in full in cash of all ABL Obligations (other than contingent indemnity obligations with respect to then unasserted claims) with respect thereto or the delivery or provision of cash collateral in respect thereof in compliance with the terms of any ABL Credit Agreement, and (b) the termination of all commitments to extend credit under the ABL Documents.
Discharge of Term Obligations shall mean (i) the payment in full in cash of all outstanding Term Obligations (other than contingent indemnity obligations with respect to then unasserted claims) and (ii) the termination of all Hedging Agreements between any Term Loan Party and any Term Hedging Affiliate and of all Bank Products Agreements between any Term Loan Party and any Term Bank Products Affiliate and payment in full in cash of all Term Obligations (other than contingent indemnity obligations with respect to then unasserted claims) with respect thereto or the delivery or provisions of cash collateral in respect thereof in compliance with the terms of any Term Credit Agreement.
Enforcement Notice shall mean a written notice delivered by either the ABL Agent or the Term Agent to the other announcing that an Enforcement Period has commenced.
Enforcement Period shall mean the period of time following the receipt by either the ABL Agent or the Term Agent of an Enforcement Notice from the other and continuing until the earliest of (a) in case of an Enforcement Period commenced by the Term Agent, the Discharge of Term Obligations, (b) in the case of an Enforcement Period commenced by the ABL Agent, the Discharge of ABL Obligations, or (c) the ABL Agent or the Term Agent (as applicable) terminate, or agree in writing to terminate, the Enforcement Period.
Event of Default shall mean an Event of Default under any ABL Credit Agreement or any Term Credit Agreement.
Exercise Any Secured Creditor Remedies or Exercise of Secured Creditor Remedies shall mean, except as otherwise provided in the final sentence of this definition:
(a) the taking by any Secured Party of any action to enforce or realize upon any Lien, including the institution of any foreclosure proceedings or the noticing of any public or private sale pursuant to Article 9 of the Uniform Commercial Code;
(b) the exercise by any Secured Party of any right or remedy provided to a secured creditor on account of a Lien under any of the Credit Documents, under applicable law, in an Insolvency Proceeding or otherwise, including the election to retain any of the Collateral in satisfaction of a Lien;
(c) the taking of any action by any Secured Party or the exercise of any right or remedy by any Secured Party in respect of the collection on, set off against, marshaling of, injunction respecting or foreclosure on the Collateral or the Proceeds thereof;
(d) the appointment, on the application of a Secured Party, of a receiver, receiver and manager or interim receiver of all or part of the Collateral;
(e) the sale, lease, license, or other disposition of all or any portion of the Collateral by private or public sale conducted by a Secured Party or any other means at the direction of a Secured Party permissible under applicable law;
(f) the exercise of any other right of a secured creditor under Part 6 of Article 9 of the Uniform Commercial Code; and
(g) the exercise by a Secured Party of any voting rights relating to any Capital Stock included in the Collateral.
For the avoidance of doubt, none of the following shall be deemed to constitute an Exercise of Secured Creditor Remedies: (i) the filing of a proof of claim in bankruptcy court or seeking adequate protection, (ii) the exercise of rights by the ABL Agent upon the occurrence of a Cash Dominion Event (as defined in the ABL Credit Agreement), including, without limitation, the notification of account debtors, depository institutions or any other Person to deliver proceeds of Collateral to the ABL Agent (unless and until the ABL Lenders cease making Credit Extensions to the ABL Borrower, in which event an Exercise of Secured Creditor Remedies shall be deemed to have occurred), (iii) the consent by a Secured Party to a sale or other disposition by any Loan Party of any of its assets or properties, (iv) the acceleration of all or a portion of the ABL Obligations or the Term Obligations, (v) the reduction of advance rates or sub-limits by the ABL Agent and the ABL Lenders, or (vi) the imposition of reserves by the ABL Agent.
Financing Lease shall mean any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee.
Foreign Subsidiary means any Subsidiary of the Borrower or any Guarantor that is organized under the laws of a jurisdiction other than the United States of America, any state thereof or the District of Columbia.
Former Lender shall have the meaning set forth in the ABL Credit Agreement as in effect on the date hereof.
General Intangibles shall mean all general intangibles as such term is defined in the Uniform Commercial Code including, with respect to any Loan Party, all contracts, agreements, instruments and indentures in any form, and portions thereof, to which such Loan Party is a party or under which such Loan Party has any right, title or interest or to which such Loan Party or any property of such Loan Party is subject, as the same may be amended, supplemented, restated or otherwise modified from time to time.
Governmental Authority shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
Guarantor shall mean any of the ABL Guarantors or Term Guarantors.
Hedging Agreement shall mean any interest rate, foreign currency, commodity or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity or equity values (including any option with
respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement.
Holdings shall mean TCS Holdings Inc., a Delaware corporation.
Indebtedness shall have the meaning provided in the ABL Credit Agreement and the Term Credit Agreement as in effect on the date hereof.
Insolvency Proceeding shall mean (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors or other similar arrangement in respect of its creditors generally or any substantial portion of its creditors; in each case covered by clauses (a) and (b) undertaken under United States Federal, State or foreign law, including the Bankruptcy Code.
Intellectual Property shall mean, with respect to any grantor, the collective reference to such grantors Copyrights, Copyright Licenses, Patents, Patent Licenses, Trade Secrets, Trade Secret Licenses, Trademarks and Trademark Licenses.
Lender(s) means individually, the ABL Lenders or the Term Lenders and collectively means all of the ABL Lenders and the Term Lenders.
Lien shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien (statutory or otherwise), pledge, hypothecation, encumbrance, collateral assignment, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any Financing Lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
Lien Priority shall mean with respect to any Lien of the ABL Agent, the ABL Lenders, the Term Agent or the Term Lenders in the Collateral, the order of priority of such Lien as specified in Section 2.1.
Loan Parties shall mean the ABL Loan Parties and the Term Loan Parties.
Party shall mean the ABL Agent or the Term Agent, and Parties shall mean both the ABL Agent and the Term Agent.
Patent License shall mean with respect to any Loan Party, all written license agreements of such Loan Party with any other Person that is not an Affiliate or a Subsidiary of such Loan Party, in connection with any of the Patents of such Loan Party or such other Persons patents, whether such Loan Party is a licensor or a licensee under any such agreement.
Patents shall mean with respect to any Loan Party, all of such Loan Partys right, title and interest in and to all United States and foreign patents, patent applications and patentable inventions and all reissues and extensions thereof, including (a) all inventions and improvements described and claimed therein, (b) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (c) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including payments under all licenses entered into in connection therewith, and damages and payments for past, present or future infringements thereof), and (d) all other rights corresponding thereto in the United States and all reissues, divisions, continuations, continuations-
in-part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Loan Party accruing thereunder or pertaining thereto.
Person shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.
Priority Collateral shall mean the ABL Priority Collateral or the Term Priority Collateral, as applicable.
Proceeds shall mean (a) all proceeds, as defined in Article 9 of the Uniform Commercial Code, with respect to the Collateral, and (b) whatever is recoverable or recovered when any Collateral is sold, exchanged, collected, or disposed of, whether voluntarily or involuntarily.
Property shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.
Real Property shall mean any right, title or interest in and to real property, including any fee interest, leasehold interest, easement, or license and any other right to use or occupy real property.
Secured Parties shall mean the ABL Secured Parties and the Term Secured Parties.
Shared Collateral means all amounts paid by the holder of Subordinated Indebtedness (other than any Indebtedness owing to Holdings or a Subsidiary of Holdings by Holdings or a Subsidiary Holdings) to any Party pursuant to the subordination provisions of the instruments, documents and agreements evidencing such Subordinated Indebtedness.
Subsidiary shall mean with respect to any Person (the parent) at any date, any corporation, limited liability company, partnership, association or other entity (a) of which Capital Stock representing more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
Term Agent shall have the meaning assigned to that term in the introduction to this Agreement and shall include any successor thereto as well as any Person designated as the Agent, Administrative Agent, Collateral Agent, Trustee, Collateral Trustee or similar term under any Term Credit Agreement.
Term Bank Products Affiliate shall mean any Term Credit Agreement Lender, any Affiliate of any Term Credit Agreement Lender, any Former Lender or any Affiliate of a Former Lender that has entered into a Bank Products Agreement with a Term Loan Party with the obligations of such Term Loan Party thereunder being secured by one or more Term Collateral Documents.
Term Borrower shall have the meaning assigned to that term in the recitals to this Agreement.
Term Collateral Documents shall mean all Collateral Documents or similar term as defined in any Term Credit Agreement, and all other security agreements, mortgages, deeds of trust and other collateral documents executed and delivered in connection with any Term Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time.
Term Credit Agreement shall have the meaning assigned to that term in the recitals to this Agreement and shall include one or more other agreements, indentures or facilities extending the maturity of, consolidating, restructuring, refunding, replacing or refinancing all or any portion of, or, subject to the terms of this Agreement, increasing, the Term Obligations, whether by the same or any other agent, trustee, lender, group of lenders, creditor or group of creditors and whether or not increasing the amount of any Indebtedness that may be incurred thereunder.
Term Documents shall mean any Term Credit Agreement, any Term Collateral Documents, those other ancillary agreements as to which the Term Agent or any Term Lender is a party or a beneficiary and all other agreements, instruments, documents and certificates, now or hereafter executed by or on behalf of any Term Loan Party or any of its respective Subsidiaries or Affiliates, and delivered to the Term Agent, in connection with any of the foregoing or any Term Credit Agreement, in each case as the same may be amended, supplemented, restated or otherwise modified from time to time.
Term Enforcement Date means the date which is 180 days after the occurrence of (i) an Event of Default (under and as defined in the Term Credit Agreement) and (ii) the ABL Agents receipt of an Enforcement Notice from the Term Agent.
Term Guarantors shall mean the collective reference to Holdings, each Restricted Subsidiary of the Borrower (other than any CFC, any Subsidiary owned directly or indirectly by a CFC and any Domestic Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of the assets of such Domestic Subsidiary consist of Equity Interests in one or more Foreign Subsidiaries) and each other Restricted Subsidiary of Holdings that is required to sign a counterpart to Term Credit Agreement pursuant to Section 6.12(a)(i) thereof.
Term Hedging Affiliate shall mean any Term Credit Agreement Lender, any Affiliate of any Term Credit Agreement Lender, any Former Lender or any Affiliate of any Former Lender that has entered into a Hedging Agreement with a Term Loan Party with the obligations of such Term Loan Party thereunder being secured by one or more Term Collateral Documents by a Term Loan Party.
Term Lenders shall have the meaning assigned to that term in the introduction to this Agreement and shall include all Term Bank Product Affiliates and Term Hedging Affiliates all successors, assigns, transferees and replacements thereof, as well as any Person designated as a Lender or an Incremental Term Lender under any Term Credit Agreement.
Term Loan Parties shall have the meaning assigned to that term in the recitals to this Agreement.
Term Loan Priority Accounts means any Deposit Accounts or Securities Accounts that are intended to solely contain identifiable proceeds of the Term Priority Collateral (it being understood that any property in such Deposit Accounts or Securities Accounts which is not identifiable proceeds of Term Priority Collateral shall not be Term Priority Collateral solely by virtue of being on deposit in any such Deposit Account or Securities Account).
Term Obligations shall mean all obligations of every nature of each Term Loan Party from time to time owed to the Term Agent, the Term Lenders or any of them, under any Term Document (including in respect of Incremental Term Loans), whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Term Loan Party, would have accrued on any Term Obligation, whether or not a claim is allowed against such Term Loan Party for such interest in the related bankruptcy proceeding), fees, expenses, indemnification or otherwise, payment for early termination of Hedging Agreements, and all other amounts owing or due under the terms of the Term Documents,
as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time; provided that the portion of the Term Obligations comprising the aggregate principal amount of outstanding loans in excess of $325,000,000 shall not constitute Term Obligations.
Term Priority Collateral shall mean:
(1) all Equipment, Fixtures, Real Property, Intellectual Property and Investment Property (other than any Investment Property described in clauses 3(y) and 8 of the definition of ABL Priority Collateral);
(2) except to the extent constituting ABL Priority Collateral, all Instruments, Documents and General Intangibles,
(3) all other Collateral, other than (A) the ABL Priority Collateral (including ABL Priority Proceeds) and (B) Shared Collateral, and
(4) all collateral security and guarantees with respect to the foregoing, and all cash, money, insurance proceeds, instruments, securities, financial assets and deposit accounts directly received as proceeds of any Collateral, other than the ABL Priority Collateral (including ABL Priority Proceeds) (such proceeds, Term Priority Proceeds).
Term Recovery shall have the meaning set forth in Section 5.3(b).
Term Secured Parties shall mean the Term Agent and the Term Lenders.
Trade Secret Licenses shall mean any and all agreements, whether written or oral, providing for the grant by or to any Loan Party of any right in or to Trade Secrets, to the extent that a grant of a security interest in such Trade Secret License is not prohibited by applicable law or the applicable Trade Secret License.
Trade Secrets shall mean with respect to any Loan Party, all of such Loan Partys right, title and interest in and to all United States and foreign trade secrets, including know how, processes, formulae, compositions, designs, and confidential business and technical information, and all rights of any kind whatsoever accruing thereunder or pertaining thereto, including (a) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including payments under all licenses, non disclosure agreements and memoranda of understanding entered into in connection therewith, and damages and payments for past or future misappropriations thereof, and (b) the right to sue or otherwise recover for past, present or future misappropriations thereof.
Trademark License shall mean with respect to any Loan Party, all written license agreements of such Loan Party with any other Person who is not an Affiliate or a Subsidiary of such Loan Party in connection with any of the Trademarks of such Loan Party or such other Persons names or trademarks, whether such Loan Party is a licensor or a licensee under any such agreement.
Trademarks shall mean with respect to any Loan Party, all of such Loan Partys right, title and interest in and to all United States and foreign trademarks, service marks, trade names, trade dress or other indicia of trade origin or business identifiers, trademark and service mark registrations, and applications for trademark or service mark registrations (except for intent to use applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed, it being understood and agreed that the carve out in this parenthetical shall be applicable only
if and for so long as a grant of a security interest in such intent to use application would invalidate or otherwise jeopardize grantors rights therein), and any renewals thereof, including (a) the right to sue or otherwise recover for any and all past, present and future infringements or dilutions thereof, (b) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (c) all other rights corresponding thereto and all other rights of any kind whatsoever of such Loan Party accruing thereunder or pertaining thereto in the United States, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark, service mark, trade name, trade dress or other indicia of trade origin or business identifiers.
Uniform Commercial Code shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York; provided that to the extent that the Uniform Commercial Code is used to define any term in any security document or this Agreement and such term is defined differently in differing Articles of the Uniform Commercial Code, the definition of such term contained in Article 9 shall govern; provided, further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, publication or priority of, or remedies with respect to, Liens of any Party is governed by the Uniform Commercial Code or foreign personal property security laws as enacted and in effect in a jurisdiction other than the State of New York, the term Uniform Commercial Code will mean the Uniform Commercial Code or such foreign personal property security laws as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.
Use Period means the period commencing on the date that the ABL Agent (or a Loan Party acting with the consent of the ABL Agent) commences the liquidation and sale of the ABL Priority Collateral in a manner as provided in Section 3.6 (having theretofore furnished the Term Agent with an Enforcement Notice) and ending 120 days thereafter (but in no event later than 270 days following the date the Term Agent provides an Enforcement Notice to the ABL Agent). If any stay or other order that prohibits any of the ABL Agent, the other ABL Secured Parties or any ABL Loan Party (with the consent of the ABL Agent) from commencing and continuing to Exercise Any Secured Creditor Remedies or to liquidate and sell the ABL Priority Collateral has been entered by a court of competent jurisdiction, such 120-day period and 270-day period shall be tolled during the pendency of any such stay or other order and the Use Period shall be so extended.
Section 1.3 Rules of Construction. Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term including is not limiting and shall be deemed to be followed by the phrase without limitation, and the term or has, except where otherwise indicated, the inclusive meaning represented by the phrase and/or. The words hereof, herein, hereby, hereunder, and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Article, section, subsection, clause, schedule and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement to any agreement, instrument, or document shall include all alterations, amendments, changes, restatements, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, restatements, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Persons successors and assigns. Any reference herein to the repayment in full of an obligation shall mean the payment in full in cash of such obligation, or in such other manner as may be approved in writing by the requisite holders or representatives in respect of such obligation.
ARTICLE 2
LIEN PRIORITY
Section 2.1 Priority of Liens.
(a) Subject to the provisos in subclauses (b) and (c) of Section 4.1, notwithstanding (i) the date, time, method, manner, or order of grant, attachment, or perfection of any Liens granted to the ABL Agent or the ABL Lenders in respect of all or any portion of the Collateral or of any Liens granted to the Term Agent or the Term Lenders in respect of all or any portion of the Collateral and regardless of how any such Lien was acquired (whether by grant, statute, operation of law, subrogation or otherwise), (ii) the order or time of filing or recordation of any document or instrument for perfecting the Liens in favor of the ABL Agent or the Term Agent (or ABL Lenders or Term Lenders) in any Collateral, (iii) any provision of the Uniform Commercial Code, the Bankruptcy Code or any other applicable law, or of the ABL Documents or the Term Documents, or (iv) whether the ABL Agent or the Term Agent, in each case, either directly or through agents, holds possession of, or has control over, all or any part of the Collateral, the ABL Agent, on behalf of itself and the ABL Lenders, and the Term Agent, on behalf of itself and the Term Lenders, hereby agree that:
(1) any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the Term Agent or any Term Lender that secures all or any portion of the Term Obligations shall in all respects be junior and subordinate to all Liens granted to the ABL Agent and the ABL Lenders in the ABL Priority Collateral to secure all or any portion of the ABL Obligations;
(2) any Lien in respect of all or any portion of the ABL Priority Collateral now or hereafter held by or on behalf of the ABL Agent or any ABL Lender that secures all or any portion of the ABL Obligations shall in all respects be senior and prior to all Liens granted to the Term Agent or any Term Lender in the ABL Priority Collateral to secure all or any portion of the Term Obligations;
(3) any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of the ABL Agent or any ABL Lender that secures all or any portion of the ABL Obligations shall in all respects be junior and subordinate to all Liens granted to the Term Agent and the Term Lenders in the Term Priority Collateral to secure all or any portion of the Term Obligations; and
(4) any Lien in respect of all or any portion of the Term Priority Collateral now or hereafter held by or on behalf of the Term Agent or any Term Lender that secures all or any portion of the Term Obligations shall in all respects be senior and prior to all Liens granted to the ABL Agent or any ABL Lender in the Term Priority Collateral to secure all or any portion of the ABL Obligations.
(b) The Parties agree that their respective rights in the Shared Collateral are of equal priority. Any amounts received on account of the Shared Collateral shall be distributed to the Parties pro rata based upon the then outstanding amount of ABL Obligations and Term Obligations.
(c) The Term Agent, for and on behalf of itself and the Term Lenders, acknowledges and agrees that, concurrently herewith, the ABL Agent, for the benefit of itself and the ABL Lenders, has been granted Liens upon all of the Collateral in which the Term Agent has been granted Liens and the Term Agent hereby consents thereto. The ABL Agent, for and on behalf of itself and the ABL Lenders, acknowledges and agrees that, concurrently herewith, the Term Agent, for the benefit of itself and the
Term Lenders, has been granted Liens upon all of the Collateral in which the ABL Agent has been granted Liens and the ABL Agent hereby consents thereto. The subordination of Liens by the Term Agent and the ABL Agent in favor of one another as set forth herein shall not be deemed to subordinate the Term Agents Liens or the ABL Agents Liens to the Liens of any other Person.
Section 2.2 Waiver of Right to Contest Liens.
(a) The Term Agent, for and on behalf of itself and the Term Lenders, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of the ABL Agent and the ABL Lenders in respect of the Collateral or the provisions of this Agreement. Except to the extent expressly set forth in this Agreement, the Term Agent, for itself and on behalf of the Term Lenders, agrees that none of the Term Agent or the Term Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by the ABL Agent or any ABL Lender under the ABL Documents with respect to the ABL Priority Collateral. Except to the extent expressly set forth in this Agreement, the Term Agent, for itself and on behalf of the Term Lenders, hereby waives any and all rights it or the Term Lenders may have as a junior lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which the ABL Agent or any ABL Lender seeks to enforce its Liens in any ABL Priority Collateral. The foregoing shall not be construed to prohibit the Term Agent from enforcing the provisions of this Agreement as to the relative priority of the parties hereto.
(b) The ABL Agent, for and on behalf of itself and the ABL Lenders, agrees that it and they shall not (and hereby waives any right to) take any action to contest or challenge (or assist or support any other Person in contesting or challenging), directly or indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the validity, priority, enforceability, or perfection of the Liens of the Term Agent or the Term Lenders in respect of the Collateral or the provisions of this Agreement. Except to the extent expressly set forth in this Agreement, the ABL Agent, for itself and on behalf of the ABL Lenders, agrees that none of the ABL Agent or the ABL Lenders will take any action that would interfere with any Exercise of Secured Creditor Remedies undertaken by the Term Agent or any Term Lender under the Term Documents with respect to the Term Priority Collateral. Except to the extent expressly set forth in this Agreement, the ABL Agent, for itself and on behalf of the ABL Lenders, hereby waives any and all rights it or the ABL Lenders may have as a junior lien creditor or otherwise to contest, protest, object to, or interfere with the manner in which the Term Agent or any Term Lender seeks to enforce its Liens in any Term Priority Collateral. The foregoing shall not be construed to prohibit the ABL Agent from enforcing the provisions of this Agreement as to the relative priority of the parties hereto.
Section 2.3 Remedies Standstill.
(a) The Term Agent, on behalf of itself and the Term Lenders, agrees that, from the date hereof until the earlier of (i) the Term Enforcement Date, or (ii) the date upon which the Discharge of ABL Obligations shall have occurred, neither the Term Agent nor any Term Lender will Exercise Any Secured Creditor Remedies with respect to any of the ABL Priority Collateral without the written consent of the ABL Agent, and will not take, receive or accept any Proceeds of ABL Priority Collateral, it being understood and agreed that the temporary deposit of Proceeds of ABL Priority Collateral in a Deposit Account controlled by the Term Agent shall not constitute a breach of this Agreement so long as such Proceeds are promptly remitted to the ABL Agent. From and after the date upon which the Discharge of ABL Obligations shall have occurred (or prior thereto upon the occurrence of the Term Enforcement Date), the Term Agent or any Term Lender may Exercise Any Secured Creditor Remedies under the
Term Documents or applicable law as to any ABL Priority Collateral; provided, however, that any Exercise of Secured Creditor Remedies with respect to any Collateral by the Term Agent is at all times subject to the provisions of this Agreement, including Section 4.1 hereof, and further provided that the Term Agent shall not Exercise Any Secured Parties remedies against the ABL Priority Collateral after the Term Enforcement Date and prior to Discharge of ABL Obligations (A) at any time the ABL Agent or the ABL Lenders have commenced and are diligently pursuing enforcement action against the ABL Priority Collateral, (B) at any time that any Loan Party is then a debtor under or with respect to (or otherwise subject to) any Insolvency Proceeding, or (C) if the Event of Default under the Term Credit Agreement is waived in accordance with the terms of the Term Credit Agreement.
(b) The ABL Agent, on behalf of itself and the ABL Lenders, agrees that, from the date hereof until the earlier of (i) the ABL Enforcement Date, or (ii) the date upon which the Discharge of Term Obligations shall have occurred, neither the ABL Agent nor any ABL Lender will Exercise Any Secured Creditor Remedies with respect to the Term Priority Collateral without the written consent of the Term Agent, and will not take, receive or accept any Proceeds of the Term Priority Collateral, it being understood and agreed that the temporary deposit of Proceeds of Term Priority Collateral in a Deposit Account controlled by the ABL Agent shall not constitute a breach of this Agreement so long as such Proceeds are promptly remitted to the Term Agent. From and after the date upon which the Discharge of Term Obligations shall have occurred (or prior thereto upon the occurrence of the ABL Enforcement Date), the ABL Agent or any ABL Lender may Exercise Any Secured Creditor Remedies under the ABL Documents or applicable law as to any Term Priority Collateral; provided, however, that any Exercise of Secured Creditor Remedies with respect to any Collateral by the ABL Agent is at all times subject to the provisions of this Agreement, including Section 4.1 hereof, and further provided that the ABL Agent shall not Exercise Any Secured Parties remedies with respect to the Term Priority Collateral after the ABL Enforcement Date and prior to the Discharge of Term Obligations (A) at any time the Term Agent or the Term Lenders have commenced and are diligently pursuing enforcement action against the Term Priority Collateral, (B) at any time that any Loan Party is then a debtor under or with respect to (or otherwise subject to) any Insolvency Proceeding, or (C) if the Event of Default under the ABL Credit Agreement is waived in accordance with the terms of the ABL Credit Agreement.
(c) Notwithstanding the provisions of Sections 2.3(a), 2.3(b) or any other provision of this agreement, nothing contained herein shall be construed to prevent (i) any Agent or any Lender from filing a claim or statement of interest with respect to the ABL Obligations or Term Obligations owed to it in any Insolvency Proceeding commenced by or against any Loan Party, (ii) take any action (not adverse to the priority status of the Liens of the other Agent or other Lenders on the Collateral in which such other Agent or other Lender has a priority Lien or the rights of the other Agent or any of the other Lenders to exercise remedies in respect thereof) in order to create, perfect, preserve or protect (but not enforce its Lien) on any Collateral, (in) file any necessary or responsive pleadings in opposition to any motion, adversary proceeding or other pleading filed by any Person objecting to or otherwise seeking disallowance of the claim or Lien of such Agent or Lender, (iv) file any pleadings, objections, motions, or agreements which assert rights available to unsecured creditors of the Loan Parties arising under any Insolvency Proceeding or applicable non-bankruptcy law, (v) vote on any plan of reorganization or file any proof of claim in any Insolvency Proceeding of any Loan Party, or (vi) object to the proposed retention of collateral by the other Agent or any other Lender in full or partial satisfaction of any ABL Obligations or Term Obligations due to such other Agent or Lender, in each case (i) through (vi) above to the extent not inconsistent with, or could not result in a resolution inconsistent with, the terms of this Agreement.
Section 2.4 Exercise of Rights.
(a) No Other Restrictions. Except as expressly set forth in this Agreement, each of the Term Agent, each Term Lender, the ABL Agent and each ABL Lender shall have any and all rights
and remedies it may have as a creditor under applicable law, including the right to the Exercise of Secured Creditor Remedies; provided, however, that the Exercise of Secured Creditor Remedies with respect to the Collateral shall be subject to the Lien Priority and to the provisions of this Agreement, including Sections 2.3 and 4.1 hereof. The ABL Agent may enforce the provisions of the ABL Documents, the Term Agent may enforce the provisions of the Term Documents and each may Exercise Any Secured Creditor Remedies, all in such order and in such manner as each may determine in the exercise of its sole discretion, consistent with the terms of this Agreement and mandatory provisions of applicable law; provided, however, that each of the ABL Agent and the Term Agent agrees to provide to the other (x) an Enforcement Notice prior to the commencement of any Exercise of Secured Creditor Remedies and (y) copies of any notices that it is required under applicable law to deliver to the Borrower or any Guarantor; provided further, however, that the ABL Agents failure to provide any such copies to the Term Agent (but not the Enforcement Notice) shall not impair any of the ABL Agents rights hereunder or under any of the ABL Documents and the Term Agents failure to provide any such copies to the ABL Agent (but not the Enforcement Notice) shall not impair any of the Term Agents rights hereunder or under any of the Term Documents. Each of the Term Agent, each Term Lender, the ABL Agent and each ABL Lender agrees (i) that it will not institute any suit or other proceeding or assert in any suit, Insolvency Proceeding or other proceeding any claim, in the case of the Term Agent and each Term Lender, against either the ABL Agent or any other ABL Secured Party, and in the case of the ABL Agent and each other ABL Secured Party, against either the Term Agent or any other Term Secured Party, seeking damages from or other relief by way of specific performance, instructions or otherwise, with respect to, any action taken or omitted to be taken by such Person with respect to the Collateral which is consistent with the terms of this Agreement, and none of such Parties shall be liable for any such action taken or omitted to be taken, or (ii) it will not be a petitioning creditor or otherwise assist in the filing of an involuntary Insolvency Proceeding.
(b) Release of Liens.
(i) In the event of (A) any private or public sale of all or any portion of the ABL Priority Collateral in connection with any Exercise of Secured Creditor Remedies by the ABL Agent or with the consent of the ABL Agent (other than in connection with a refinancing as described in Section 5.2(d)), or (B) any sale, transfer or other disposition of all or any portion of the ABL Priority Collateral (other than in connection with a refinancing as described in Section 5.2(d)), so long as such sale, transfer or other disposition under this clause (B) is (1) then permitted by the ABL Documents or consented to by the requisite ABL Lenders, and (2) then permitted by the Term Documents or consented to by the requisite Term Lenders, irrespective of whether an Event of Default has occurred, the Term Agent agrees, on behalf of itself and the Term Lenders that any such sale will be free and clear of the Liens on such ABL Priority Collateral securing the Term Obligations, and the Term Agents and the Term Secured Parties Liens with respect to the ABL Priority Collateral so sold, transferred, disposed or released shall terminate and be automatically released without further action concurrently with, and to the same extent as, the release of the ABL Secured Parties Liens on such ABL Priority Collateral. In furtherance of, and subject to, the foregoing, the Term Agent agrees that it will promptly execute any and all Lien releases or other documents reasonably requested by the ABL Agent in connection therewith. The Term Agent hereby appoints the ABL Agent and any officer or duly authorized person of the ABL Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney in the place and stead of the Term Agent and in the name of the Term Agent or in the ABL Agents own name, from time to time, in the ABL Agents sole discretion, for the purposes of carrying out the terms of this paragraph, to take any and all appropriate action and to execute and deliver any and all documents and instruments as may be necessary or desirable to accomplish the purposes of this paragraph, including any financing statements, endorsements, assignments, releases or other documents or instruments of transfer (which appointment, being coupled with an interest, is irrevocable).
(ii) In the event of (A) any private or public sale of all or any portion of the Term Priority Collateral in connection with any Exercise of Secured Creditor Remedies by or with the consent of the Term Agent (other than in connection with a refinancing as described in Section 5.2(d)), or (B) any sale, transfer or other disposition of all or any portion of the Term Priority Collateral, so long as such sale, transfer or other disposition under this clause (B) is (1) then permitted by the Term Documents or consented to by the requisite Term Lenders, and (2) then permitted by the ABL Documents or consented to by the requisite ABL Lenders, irrespective of whether an Event of Default has occurred, the ABL Agent agrees, on behalf of itself and the ABL Lenders, that any such sale will be free and clear of the Liens on such Term Priority Collateral securing the ABL Obligations and the ABL Agents and the ABL Secured Parties Liens with respect to the Term Priority Collateral so sold, transferred, disposed or released shall terminate and be automatically released without further action concurrently with, and to the same extent as, the release of the Term Secured Parties Liens on such Term Priority Collateral. In furtherance of, and subject to, the foregoing, the ABL Agent agrees that it will promptly execute any and all Lien releases or other documents reasonably requested by the Term Agent in connection therewith. The ABL Agent hereby appoints the Term Agent and any officer or duly authorized person of the Term Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power of attorney in the place and stead of the ABL Agent and in the name of the ABL Agent or in the Term Agents own name, from time to time, in the Term Agents sole discretion, for the purposes of carrying out the terms of this paragraph, to take any and all appropriate action and to execute and deliver any and all documents and instruments as may be necessary or desirable to accomplish the purposes of this paragraph, including any financing statements, endorsements, assignments, releases or other documents or instruments of transfer (which appointment, being coupled with an interest, is irrevocable).
Section 2.5 No New Liens.
(a) Until the date upon which the ABL Obligations shall have been paid in full in cash and all commitments to extend credit under the ABL Documents have been terminated, the parties hereto agree that no Term Secured Party shall acquire or hold any Lien on any assets of any Loan Party securing any Term Obligation which assets are not also subject to the Lien of the ABL Agent under the ABL Documents. If any Term Secured Party shall (nonetheless and in breach hereof) acquire or hold any Lien on any assets of any Loan Party securing any Term Obligation which assets are not also subject to the Lien of the ABL Agent under the ABL Documents, subject to the Lien Priority set forth herein, then the Term Agent (or the relevant Term Secured Party) shall, without the need for any further consent of any other Term Secured Party, the Term Borrower or any Term Guarantor and notwithstanding anything to the contrary in any other Term Document, be deemed to also hold and have held such Lien as agent or bailee for the benefit of the ABL Agent as security for the ABL Obligations (subject to the Lien Priority and other terms hereof) and shall promptly notify the ABL Agent in writing of the existence of such Lien.
(b) Until the date upon which the Term Obligations shall have been paid in full in cash, the parties hereto agree that no ABL Secured Party shall acquire or hold any Lien on any assets of any Loan Party securing any ABL Obligation which assets are not also subject to the Lien of the Term Agent under the Term Documents. If any ABL Secured Party shall (nonetheless and in breach hereof) acquire or hold any Lien on any assets of any Loan Party securing any ABL Obligation which assets are not also subject to the Lien of the Term Agent under the Term Documents, subject to the Lien Priority set forth herein, then the ABL Agent (or the relevant ABL Secured Party) shall, without the need for any further consent of any other ABL Secured Party, the ABL Borrower or any ABL Guarantor and notwithstanding anything to the contrary in any other ABL Document be deemed to also hold and have held such Lien as agent or bailee for the benefit of the Term Agent as security for the Term Obligations (subject to the Lien Priority and other terms hereof) and shall promptly notify the Term Agent in writing of the existence of such Lien.
Section 2.6 Waiver of Marshalling.
(a) Until the payment in full in cash of the ABL Obligations and the termination of all commitments to extend credit under the ABL Documents, the Term Agent, on behalf of itself and the Term Secured Parties, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law with respect to the ABL Priority Collateral or any other similar rights a junior secured creditor may have under applicable law.
(b) Until the payment in full in cash of the Term Obligations, the ABL Agent, on behalf of itself and the ABL Secured Parties, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law with respect to the Term Priority Collateral or any other similar rights a junior secured creditor may have under applicable law.
ARTICLE 3
ACTIONS OF THE PARTIES
Section 3.1 Certain Actions Permitted. The Term Agent and the ABL Agent may make such demands or file such claims in respect of the Term Obligations or the ABL Obligations, as applicable, as are necessary to prevent the waiver or bar of such claims under applicable statutes of limitations or other statutes, court orders, or rules of procedure at any time. Except as provided in Section 5.2, nothing in this Agreement shall prohibit the receipt by the Term Agent or any Term Lender of the required payments of interest, principal and other amounts owed in respect of the Term Obligations so long as such receipt is not the direct or indirect result of the exercise by the Term Agent or any Term Lender of rights or remedies as a secured creditor (including set-off with respect to ABL Priority Collateral) or enforcement in contravention of this Agreement of any Lien held by any of them. Except as provided in Section 5.2, nothing in this Agreement shall prohibit the receipt by the ABL Agent or any ABL Lender of the required payments of interest, principal and other amounts owed in respect of the ABL Obligations so long as such receipt is not the direct or indirect result of the exercise by the ABL Agent or any ABL Lender of rights or remedies as a secured creditor (including set-off with respect to Term Priority Collateral) or enforcement in contravention of this Agreement of any Lien held by any of them.
Section 3.2 Agent for Perfection. The ABL Agent, for and on behalf of itself and each ABL Lender, and the Term Agent, for and on behalf of itself and each Term Lender, as applicable, each agree to hold all Collateral in their respective possession, custody, or control (or in the possession, custody, or control of agents or bailees for either) as agent for the other solely for the purpose of perfecting the security interest granted to each in such Collateral, subject to the terms and conditions of this Section 3.2. None of the ABL Agent, the ABL Lenders, the Term Agent, or the Term Lenders, as applicable, shall have any obligation whatsoever to the others to assure that the Collateral is genuine or owned by the Borrower, any Guarantor, or any other Person or to preserve rights or benefits of any Person. The duties or responsibilities of the ABL Agent and the Term Agent under this Section 3.2 are and shall be limited solely to holding or maintaining control of the Collateral as agent for the other Party for purposes of perfecting the Lien held by the Term Agent or the ABL Agent, as applicable. The ABL Agent is not and shall not be deemed to be a fiduciary of any kind for the Term Agent, the Term Lenders, or any other Person. The Term Agent is not and shall not be deemed to be a fiduciary of any kind for the ABL Agent, the ABL Lenders, or any other Person. In the event that (a) the Term Agent or any Term Lender receives any Collateral or Proceeds of the Collateral in violation of the terms of this Agreement, or (b) the ABL Agent or any ABL Lender receives any Collateral or Proceeds of the Collateral in violation of the terms of this
Agreement, then the Term Agent, such Term Lender, the ABL Agent, or such ABL Lender, as applicable, shall promptly pay over such Proceeds or Collateral to (i) in the case of clause (a), the ABL Agent, or (ii) in the case of clause (b), the Term Agent, in each case, in the same form as received with any necessary endorsements, for application in accordance with the provisions of Section 4.1 of this Agreement.
Section 3.3 Sharing of Information and Access. In the event that the ABL Agent shall, in the exercise of its rights under the ABL Collateral Documents or otherwise, receive possession or control of any books and Records of any Term Loan Party which contain information identifying or pertaining to the Term Priority Collateral, the ABL Agent shall, upon request from the Term Agent and as promptly as practicable thereafter, either make available to the Term Agent such books and Records for inspection and duplication or provide to the Term Agent copies thereof. In the event that the Term Agent shall, in the exercise of its rights under the Term Collateral Documents or otherwise, receive possession or control of any books and records of any ABL Loan Party which contain information identifying or pertaining to any of the ABL Priority Collateral, the Term Agent shall, upon request from the ABL Agent and as promptly as practicable thereafter, either make available to the ABL Agent such books and records for inspection and duplication or provide the ABL Agent copies thereof.
Section 3.4 Insurance. Proceeds of Collateral include insurance proceeds and, therefore, the Lien Priority shall govern the ultimate disposition of casualty insurance proceeds. The ABL Agent and the Term Agent shall each be named as additional insured or loss payee, as applicable, with respect to all insurance policies relating to the Collateral. The ABL Agent shall have the sole and exclusive right, as against the Term Agent, to adjust settlement of insurance claims in the event of any covered loss, theft or destruction of ABL Priority Collateral. The Term Agent shall have the sole and exclusive right, as against the ABL Agent, to adjust settlement of insurance claims in the event of any covered loss, theft or destruction of Term Priority Collateral. If any insurance claim includes both ABL Priority Collateral and Term Priority Collateral and the insurer will not settle such claim separately with respect to ABL Priority Collateral and Term Priority Collateral, if the Parties are unable after negotiating in good faith to agree on the settlement for such claim, either Party may apply to a court of competent jurisdiction to make a determination as to the control of the settlement of such claim, and the courts determination shall be binding upon the Parties. All proceeds of such insurance shall be remitted to the ABL Agent or the Term Agent, as the case may be, and each of the Term Agent and ABL Agent shall cooperate (if necessary) in a reasonable manner in effecting the payment of insurance proceeds in accordance with Section 4.1 hereof.
Section 3.5 No Additional Rights For the Loan Parties Hereunder. Except as provided in Section 3.6, if any ABL Secured Party or Term Secured Party shall enforce its rights or remedies in violation of the terms of this Agreement, the Loan Parties shall not be entitled to use such violation as a defense to any action by any ABL Secured Party or Term Secured Party, nor to assert such violation as a counterclaim or basis for set off or recoupment against any ABL Secured Party or Term Secured Party.
Section 3.6 Inspection and Access Rights. (a) Without limiting any rights the ABL Agent or any other ABL Secured Party may otherwise have under applicable law or by agreement, in the event of any liquidation of the ABL Priority Collateral (or any other Exercise of Secured Creditor Remedies by or on behalf of the ABL Agent), the ABL Agent or any other Person (including the Borrower or Guarantor) acting with the consent, or on behalf, of the ABL Agent, shall have the right (a) during normal business hours on any business day, to access ABL Priority Collateral that (i) is stored or located in or on, (ii) has become an accession with respect to (within the meaning of Section 9-335 of the Uniform Commercial Code), or (iii) has been commingled with (within the meaning of Section 9-336 of the Uniform Commercial Code), Term Priority Collateral, and (b) to use the Term Priority Collateral (including, without limitation, Equipment, Fixtures, Intellectual Property, General Intangibles and Real Property), in order to assemble, inspect, copy or download information stored on, take actions to perfect its Lien on, complete a production run of Inventory involving, take possession of, move, prepare and advertise for
sale, sell (by public auction, private sale or a store closing, going out of business or similar sale, whether in bulk, in lots or to customers in the ordinary course of business or otherwise and which sale may include augmented Inventory of the same type sold in the Borrowers and Guarantors business), store or otherwise deal with the ABL Priority Collateral, in each case without notice to, the involvement of or interference by any Term Secured Party (and whether or not the Term Agent or any other Term Secured Party has commenced and is continuing to Exercise Any Secured Creditor Remedies of the Term Agent) or liability to any Term Secured Party. In the event that any ABL Secured Party has commenced and is continuing to Exercise Any Secured Creditor Remedies with respect to any ABL Priority Collateral or any other sale or liquidation of the ABL Priority Collateral has been commenced by an ABL Loan Party (with the consent of the ABL Agent), the Term Agent may not sell, assign or otherwise transfer the related Term Priority Collateral prior to the expiration of the Use Period, unless the purchaser, assignee or transferee thereof agrees to be bound by the provisions of this Section 3.6.
(b) The ABL Agent and the ABL Secured Parties shall not be obligated to pay any amounts to the Term Agent or the Term Secured Parties (or any person claiming by, through or under the Term Secured Parties, including any purchaser of the Term Priority Collateral) or to the Borrower and the Guarantors, for or in respect of the use by the ABL Agent and the ABL Secured Parties of the Term Priority Collateral and none of the ABL Agent or the ABL Secured Parties shall be obligated to secure, protect, insure or repair any such Term Priority Collateral (other than for damages caused by the ABL Agent, the ABL Secured Parties or their respective employees, agents and representatives). The ABL Agent and the ABL Secured Parties shall not have any liability to the Term Agent or the Term Secured Parties (or any person claiming by, through or under the Term Agent or the Term Secured Parties, including any purchaser of the Term Priority Collateral) as a result of any condition (including environmental condition, claim or liability) on or with respect to the Term Priority Collateral other than those arising from the gross negligence or willful misconduct of the ABL Agent, the ABL Secured Parties or their respective employees, agents and representatives, and the ABL Agent and the ABL Secured Parties shall have no duty or liability to maintain the Term Priority Collateral in a condition or manner better than that in which it was maintained prior to the use thereof by the ABL Agent and the ABL Secured Parties.
(c) The Term Agent and the other Term Secured Parties shall use commercially reasonable efforts to not hinder or obstruct the ABL Agent and the other ABL Secured Parties from exercising their rights described in Section 3.6(a) hereof.
(d) Subject to the terms hereof, the Term Agent may advertise and conduct public auctions or private sales of the Term Priority Collateral without notice (except as required by applicable law) to, the involvement of or interference by any ABL Secured Party or liability to any ABL Secured Party.
Section 3.7 Exercise of Remedies Set Off and Tracing of and Priorities in Proceeds. The Term Agent, for itself and on behalf of the Term Lenders, acknowledges and agrees that, to the extent the Term Agent or any Term Lender exercises its rights of set-off against any Loan Partys Deposit Accounts, Securities Accounts or other assets, the amount of such set-off shall be deemed to be ABL Priority Collateral to be held and distributed pursuant to Section 4.1; provided, however, that the foregoing shall not apply to any set-off by the Term Agent or Term Lender against any Term Priority Collateral to the extent applied to payment of Term Obligations. The ABL Agent, for itself and on behalf of the ABL Lenders, and the Term Agent, for itself and on behalf of the Term Lenders, further agree that prior to an issuance of any notice of Exercise of Secured Creditor Remedies by such Secured Party, any proceeds of Collateral, whether or not deposited under control agreements, which are used by any Loan Party to acquire other property which is Collateral shall not (solely as between the Agents and the Lenders) be treated as proceeds of Collateral for purposes of determining the relative priorities in the Collateral which was so acquired. In addition, unless and until the Discharge of ABL Obligations occurs, the Term Agent and
the Term Lenders each hereby consents to the application, prior to the issuance of a notice of Exercise of Secured Creditor Remedies by the Term Agent, of cash or other proceeds of Collateral, deposited under control agreements (other than any cash held in Term Loan Priority Accounts) to the repayment of ABL Obligations pursuant to the ABL Documents (subject to reborrowing as permitted in the ABL Credit Agreement).
ARTICLE 4
APPLICATION OF PROCEEDS
Section 4.1 Application of Proceeds.
(a) Revolving Nature of ABL Obligations. The Term Agent, for and on behalf of itself and the Term Lenders, expressly acknowledges and agrees that (i) any ABL Credit Agreement includes a revolving commitment, that in the ordinary course of business the ABL Agent and the ABL Lenders will apply payments and make advances thereunder, and that no application of any Collateral or the release of any Lien by the ABL Agent upon any portion of the Collateral in connection with a permitted disposition by the Loan Parties under any ABL Credit Agreement shall constitute the Exercise of Secured Creditor Remedies under this Agreement; (ii) the amount of the ABL Obligations that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and that the terms of the ABL Obligations may be modified, extended or amended from time to time, and that the aggregate amount of the ABL Obligations may be increased, replaced or refinanced, in each event, without notice to or consent by the Term Secured Parties and without affecting the provisions hereof; and (iii) all Collateral received by the ABL Agent may be applied, reversed, reapplied, credited, or reborrowed, in whole or in part, to the ABL Obligations at any time; provided, however, that from and after the date on which the ABL Agent (or any ABL Lender) commences the Exercise of Secured Creditor Remedies, all amounts received by the ABL Agent or any ABL Lender shall be applied as specified in this Section 4.1. The Lien Priority shall not be altered or otherwise affected by any such amendment, modification, supplement, extension, repayment, reborrowing, increase, replacement, renewal, restatement or refinancing of either the ABL Obligations or the Term Obligations, or any portion thereof.
(b) Application of Proceeds of ABL Priority Collateral. The ABL Agent and the Term Agent hereby agree that all ABL Priority Collateral, ABL Priority Proceeds and all other Proceeds thereof, received by either of them in connection with any Exercise of Secured Creditor Remedies or pursuant to any Insolvency Proceeding with respect to the ABL Priority Collateral shall be applied,
first, to the payment of costs and expenses of the ABL Agent in connection with such Exercise of Secured Creditor Remedies,
second, to the payment of the ABL Obligations in accordance with the ABL Documents until the Discharge of ABL Obligations shall have occurred,
third, to the payment of the Term Obligations in accordance with the Term Documents until the Discharge of Term Obligations shall have occurred; and
fourth, the balance, if any, to the Loan Parties or as a court of competent jurisdiction may direct.
provided that in the event the Term Agent receives, in connection with an Insolvency Proceeding, any Proceeds of any ABL Priority Collateral and the Lien granted in favor of the ABL Agent or the ABL Lenders in respect of such ABL Priority Collateral has been voided, avoided, subordinated, or otherwise invalidated by a court of competent jurisdiction and the pro-
visions of Section 5.3 would not be effective, then such proceeds received by the Term Agent with respect to the ABL Priority Collateral subject to avoidance, subordination or invalidation shall be applied, to the extent permitted under applicable law, to the payment of the Term Obligations in accordance with the Term Documents until the Term Obligations shall have been paid in full in cash.
(c) Application of Proceeds of Term Priority Collateral. The ABL Agent and the Term Agent hereby agree that all Term Priority Collateral, Term Priority Proceeds and all other Proceeds thereof, received by either of them in connection with any Exercise of Secured Creditor Remedies or pursuant to any Insolvency Proceeding with respect to the Term Priority Collateral shall be applied,
first, to the payment of costs and expenses of the Term Agent in connection with such Exercise of Secured Creditor Remedies,
second, to the payment of the Term Obligations in accordance with the Term Documents until the Discharge of Term Obligations shall have occurred,
third, to the payment of the ABL Obligations in accordance with the ABL Documents until the Discharge of ABL Obligations shall have occurred;
fourth, the balance, if any, to the Loan Parties or as a court of competent jurisdiction may direct;
provided that in the event the ABL Agent receives, in connection with an Insolvency Proceeding, any Proceeds of any Term Priority Collateral and the Lien granted in favor of the Term Agent or the Term Lenders in respect of such Term Priority Collateral has been voided, avoided, subordinated, or otherwise invalidated by a court of competent jurisdiction and the provisions of Section 5.3 would not be effective, then such proceeds received by the ABL Agent with respect to the Term Priority Collateral subject to avoidance, subordination or invalidation shall be applied, to the extent permitted under applicable law, to the payment of the ABL Obligations in accordance with the ABL Documents until the ABL Obligations shall have been paid in full in cash.
(d) Limited Obligation or Liability. In exercising remedies, whether as a secured creditor or otherwise, the ABL Agent shall have no obligation or liability to the Term Agent or to any Term Lender, and the Term Agent shall have no obligation or liability to the ABL Agent or any ABL Lender, regarding the adequacy of any Proceeds or for any action or omission, save and except solely for an action or omission that breaches the express obligations undertaken by each Party under the terms of this Agreement. Notwithstanding anything to the contrary herein contained, none of the Parties hereto waives any claim that it may have against a Secured Party on the grounds that a sale, transfer or other disposition by the Secured Party was not commercially reasonable in every respect as required by the Uniform Commercial Code.
(e) Turnover of Collateral After Discharge. Upon the Discharge of ABL Obligations, the ABL Agent shall deliver to the Term Agent or shall execute such documents as the Term Agent may reasonably request (at the expense of the Term Borrower) to enable the Term Agent to have control over any Collateral still in the ABL Agents possession, custody, or control in the same form as received with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct. Upon the Discharge of Term Obligations, the Term Agent shall deliver to the ABL Agent or shall execute such documents as the ABL Agent may reasonably request (at the expense of the ABL Borrower) to enable the ABL Agent to have control over any Control Collateral still in the Term Agents possession, custody or
control in the same form as received with any necessary endorsements, or as a court of competent jurisdiction may otherwise direct.
Section 4.2 Specific Performance. Each of the ABL Agent and the Term Agent is hereby authorized to demand specific performance of this Agreement, whether or not the Borrower or any Guarantor shall have complied with any of the provisions of any of the Credit Documents, at any time when the other Party shall have failed to comply with any of the provisions of this Agreement applicable to it. Each of the ABL Agent, for and on behalf of itself and the ABL Lenders, and the Term Agent, for and on behalf of itself and the Term Lenders, hereby irrevocably waives any defense based on the adequacy of a remedy at law that might be asserted as a bar to such remedy of specific performance.
ARTICLE 5
INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS
Section 5.1 Notice of Acceptance and Other Waivers.
(a) All ABL Obligations at any time made or incurred by the Borrower or any Guarantor shall be deemed to have been made or incurred in reliance upon this Agreement, and the Term Agent, on behalf of itself and the Term Lenders, hereby waives notice of acceptance, or proof of reliance by the ABL Agent or any ABL Lender of this Agreement, and notice of the existence, increase, renewal, extension, accrual, creation, or non-payment of all or any part of the ABL Obligations. All Term Obligations at any time made or incurred by the Borrower or any Guarantor shall be deemed to have been made or incurred in reliance upon this Agreement, and the ABL Agent, on behalf of itself and the ABL Lenders, hereby waives notice of acceptance, or proof of reliance, by the Term Agent or any Term Lender of this Agreement, and notice of the existence, increase, renewal, extension, accrual, creation, or nonpayment of all or any part of the Term Obligations.
(b) None of the ABL Agent, any ABL Lender, or any of their respective Affiliates, directors, officers, employees, or agents shall be liable for failure to demand, collect, or realize upon any of the Collateral or any Proceeds, or for any delay in doing so, or shall be under any obligation to sell or otherwise dispose of any Collateral or Proceeds thereof or to take any other action whatsoever with regard to the Collateral or any part or Proceeds thereof, except as specifically provided in this Agreement. If the ABL Agent or any ABL Lender honors (or fails to honor) a request by the Borrower for an extension of credit pursuant to any ABL Credit Agreement or any of the other ABL Documents, whether the ABL Agent or any ABL Lender has knowledge that the honoring of (or failure to honor) any such request would constitute a default under the terms of any Term Credit Agreement or any other Term Document or an act, condition, or event that, with the giving of notice or the passage of time, or both, would constitute such a default, or if the ABL Agent or any ABL Lender otherwise should exercise any of its contractual rights or remedies under any ABL Documents (subject to the express terms and conditions hereof), neither the ABL Agent nor any ABL Lender shall have any liability whatsoever to the Term Agent or any Term Lender as a result of such action, omission, or exercise (so long as any such exercise does not breach the express terms and provisions of this Agreement). The ABL Agent and the ABL Lenders shall be entitled to manage and supervise their loans and extensions of credit under any ABL Credit Agreement and any of the other ABL Documents as they may, in their sole discretion, deem appropriate, and may manage their loans and extensions of credit without regard to any rights or interests that the Term Agent or any of the Term Lenders have in the Collateral, except as otherwise expressly set forth in this Agreement. The Term Agent, on behalf of itself and the Term Lenders, agrees that neither the ABL Agent nor any ABL Lender shall incur any liability as a result of a sale, lease, license, application, or other disposition of all or any portion of the Collateral or Proceeds thereof, pursuant to the ABL Documents, so long as such disposition is conducted in accordance with mandatory provisions of applicable law and does not breach the provisions of this Agreement.
(c) None of the Term Agent, any Term Lender or any of their respective Affiliates, directors, officers, employees, or agents shall be liable for failure to demand, collect, or realize upon any of the Collateral or any Proceeds, or for any delay in doing so, or shall be under any obligation to sell or otherwise dispose of any Collateral or Proceeds thereof or to take any other action whatsoever with regard to the Collateral or any part or Proceeds thereof, except as specifically provided in this Agreement. If the Term Agent or any Term Lender honors (or fails to honor) a request by the Borrower for an extension of credit pursuant to any Term Credit Agreement or any of the other Term Documents, whether the Term Agent or any Term Lender has knowledge that the honoring of (or failure to honor) any such request would constitute a default under the terms of any ABL Credit Agreement or any other ABL Document or an act, condition, or event that, with the giving of notice or the passage of time, or both, would constitute such a default, or if the Term Agent or any Term Lender otherwise should exercise any of its contractual rights or remedies under the Term Documents (subject to the express terms and conditions hereof), neither the Term Agent nor any Term Lender shall have any liability whatsoever to the ABL Agent or any ABL Lender as a result of such action, omission, or exercise (so long as any such exercise does not breach the express terms and provisions of this Agreement). The Term Agent and the Term Lenders shall be entitled to manage and supervise their loans and extensions of credit under the Term Documents as they may, in their sole discretion, deem appropriate, and may manage their loans and extensions of credit without regard to any rights or interests that the ABL Agent or any ABL Lender has in the Collateral, except as otherwise expressly set forth in this Agreement. The ABL Agent, on behalf of itself and the ABL Lenders, agrees that none of the Term Agent or the Term Lenders shall incur any liability as a result of a sale, lease, license, application, or other disposition of the Collateral or any part or Proceeds thereof, pursuant to the Term Documents, so long as such disposition is conducted in accordance with mandatory provisions of applicable law and does not breach the provisions of this Agreement.
Section 5.2 Modifications to ABL Documents and Term Documents.
(a) The Term Agent, on behalf of itself and the Term Lenders, hereby agrees that, without affecting the obligations of the Term Agent and the Term Lenders hereunder, the ABL Agent and the ABL Lenders may, at any time and from time to time, in their sole discretion without the consent of or notice to the Term Agent or any Term Lender (except to the extent such notice or consent is required pursuant to the express provisions of this Agreement), and without incurring any liability to the Term Agent or any Term Lender or impairing or releasing the subordination provided for herein, amend, restate, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify any of the ABL Documents in any manner whatsoever, including, without limitation, to:
(i) change the manner, place, time, or terms of payment or renew, alter or increase, all or any of the ABL Obligations or otherwise amend, restate, supplement, or otherwise modify in any manner, or grant any waiver or release with respect to, all or any part of the ABL Obligations or any of the ABL Documents;
(ii) subject to Section 2.5, retain or obtain a Lien on any Property of any Person to secure any of the ABL Obligations, and in connection therewith to enter into any additional ABL Documents;
(iii) amend, or grant any waiver, compromise, or release with respect to, or consent to any departure from, any guaranty or other obligations of any Person obligated in any manner under or in respect of the ABL Obligations;
(iv) release its Lien on any Collateral or other Property;
(v) exercise or refrain from exercising any rights against the Borrower, any Guarantor, or any other Person;
(vi) subject to Section 2.5, retain or obtain the primary or secondary obligation of any other Person with respect to any of the ABL Obligations; and
(vii) otherwise manage and supervise the ABL Obligations as the ABL Agent shall deem appropriate.
(b) The ABL Agent, on behalf of itself and the ABL Lenders, hereby agrees that, without affecting the obligations of the ABL Agent and the ABL Lenders hereunder, the Term Agent and the Term Lenders may, at any time and from time to time, in their sole discretion without the consent of or notice to the ABL Agent or any ABL Lender (except to the extent such notice or consent is required pursuant to the express provisions of this Agreement), and without incurring any liability to the ABL Agent or any ABL Lender or impairing or releasing the subordination provided for herein, amend, restate, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify any of the Term Documents in any manner whatsoever, including, without limitation, to:
(i) change the manner, place, time, or terms of payment or renew, alter or increase, all or any of the Term Obligations or otherwise amend, restate, supplement, or otherwise modify in any manner, or grant any waiver or release with respect to, all or any part of the Term Obligations or any of the Term Documents;
(ii) subject to Section 2.5, retain or obtain a Lien on any Property of any Person to secure any of the Term Obligations, and in connection therewith to enter into any additional Term Documents;
(iii) amend, or grant any waiver, compromise, or release with respect to, or consent to any departure from, any guaranty or other obligations of any Person obligated in any manner under or in respect of the Term Obligations;
(iv) exercise or refrain from exercising any rights against the Borrower, any Guarantor, or any other Person;
(v) subject to Section 2.5, retain or obtain the primary or secondary obligation of any other Person with respect to any of the Term Obligations;
(vi) release its Lien on any Collateral or other Property; and
(vii) otherwise manage and supervise the Term Obligations as the Term Agent shall deem appropriate.
(c) No consent furnished by the ABL Agent or the Term Agent pursuant to Sections 5.2(a) or 5.2(b) hereof shall be deemed to constitute the modification or waiver of any provisions of the ABL Documents or the Term Documents, each of which remain in full force and effect as written.
(d) The ABL Obligations and the Term Obligations may be refinanced, in whole or in part, in each case, without notice to, or the consent (except to the extent a consent is required to permit the refinancing transaction under any ABL Document or any Term Document) of the ABL Agent, the ABL Lenders, the Term Agent or the Term Lenders, as the case may be, all without affecting the Lien Priorities provided for herein or the other provisions hereof, provided, however, that (i) the holders of
such refinancing Indebtedness (or an authorized agent or trustee on their behalf) bind themselves in writing to the terms of this Agreement pursuant to such documents or agreements (including amendments or supplements to this Agreement) as the ABL Agent or the Term Agent, as the case may be, shall reasonably request and in form and substance reasonably acceptable to the ABL Agent or the Term Agent, as the case may be, and any such refinancing transaction shall be in accordance with any applicable provisions of both the ABL Documents and the Term Documents (to the extent such documents survive the refinancing), and (ii) no such refinancing shall have any effect prohibited by Section 5.2(a) or 5.2(b), as applicable.
Section 5.3 Reinstatement and Continuation of Agreement.
(a) If the ABL Agent or any ABL Lender is required in any Insolvency Proceeding or otherwise to turn over or otherwise pay to the estate of the Borrower, any Guarantor, or any other Person any payment made in satisfaction of all or any portion of the ABL Obligations (an ABL Recovery), then subject to the provisions of Section 4.1, the ABL Obligations shall be reinstated to the extent of such ABL Recovery. If this Agreement shall have been terminated prior to such ABL Recovery, this Agreement shall be reinstated in full force and effect in the event of such ABL Recovery, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the Parties from such date of reinstatement. All rights, interests, agreements, and obligations of the ABL Agent, the Term Agent, the ABL Lenders, and the Term Lenders under this Agreement shall remain in full force and effect and shall continue irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of, any Insolvency Proceeding by or against the Borrower or any Guarantor or any other circumstance which otherwise might constitute a defense available to, or a discharge of the Borrower or any Guarantor in respect of the ABL Obligations or the Term Obligations. No priority or right of the ABL Agent or any ABL Lender shall at any time be prejudiced or impaired in any way by any act or failure to act on the part of the Borrower or any Guarantor or by the noncompliance by any Person with the terms, provisions, or covenants of any of the ABL Documents, regardless of any knowledge thereof which the ABL Agent or any ABL Lender may have.
(b) If the Term Agent or any Term Lender is required in any Insolvency Proceeding or otherwise to turn over or otherwise pay to the estate of the Borrower, any Guarantor, or any other Person any payment made in satisfaction of all or any portion of the Term Obligations (a Term Recovery), then subject to the provisions of Section 4.1, the Term Obligations shall be reinstated to the extent of such Term Recovery. If this Agreement shall have been terminated prior to such Term Recovery, this Agreement shall be reinstated in full force and effect in the event of such Term Recovery, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the Parties from such date of reinstatement. All rights, interests, agreements, and obligations of the ABL Agent, the Term Agent, the ABL Lenders, and the Term Lenders under this Agreement shall remain in full force and effect and shall continue irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of, any Insolvency Proceeding by or against the Borrower or any Guarantor or any other circumstance which otherwise might constitute a defense available to, or a discharge of the Borrower or any Guarantor in respect of the ABL Obligations or the Term Obligations. No priority or right of the Term Agent or any Term Lender shall at any time be prejudiced or impaired in any way by any act or failure to act on the part of the Borrower or any Guarantor or by the noncompliance by any Person with the terms, provisions, or covenants of any of the Term Documents, regardless of any knowledge thereof which the Term Agent or any Term Lender may have.
ARTICLE 6
INSOLVENCY PROCEEDINGS
Section 6.1 DIP Financing.
(a) If the Borrower or any Guarantor shall be subject to any Insolvency Proceeding in the United States at any time prior to the Discharge of ABL Obligations, and the ABL Agent or the ABL Lenders shall seek to provide the Borrower or any Guarantor with, or consent to a third party providing, any financing under Section 364 of the Bankruptcy Code or consent to any order for the use of cash collateral constituting ABL Priority Collateral under Section 363 of the Bankruptcy Code (each, a DIP Financing), with such DIP Financing to be secured by all or any portion of the Collateral (including assets that, but for the application of Section 552 of the Bankruptcy Code, would be Collateral), then the Term Agent, on behalf of itself and the Term Lenders, agrees that it will raise no objection and will not support any objection to such DIP Financing or use of cash collateral or to the Liens securing the same on the grounds of a failure to provide adequate protection for the Liens of the Term Agent securing the Term Obligations or on any other grounds (and will not request any adequate protection solely as a result of such DIP Financing or use of cash collateral that is ABL Priority Collateral except as permitted by Section 6.3(c)(i)), so long as (i) the Term Agent retains its Lien on the Collateral to secure the Term Obligations (in each case, including Proceeds thereof arising after the commencement of the case under the Bankruptcy Code) and, as to the Term Priority Collateral only, such Lien has the same priority as existed prior to the commencement of the case under the Bankruptcy Code and any Lien on the Term Priority Collateral securing such DIP Financing is junior and subordinate to the Lien of the Term Agent on the Term Priority Collateral, (ii) the terms of the DIP Financing do not compel the applicable Loan Party to seek confirmation of a specific plan of reorganization for which all or substantially all of the material terms of such plan are set forth in the DIP Financing documentation or related document; and (iii) all Liens on ABL Priority Collateral securing any such DIP Financing shall be senior to or on a parity with the Liens of the ABL Agent and the ABL Lenders securing the ABL Obligations on ABL Priority Collateral.
(b) All Liens granted to the ABL Agent or the Term Agent in any Insolvency Proceeding, whether as adequate protection or otherwise, are intended by the Parties to be and shall be deemed to be subject to the Lien Priority and the other terms and conditions of this Agreement.
Section 6.2 Relief From Stay. Until the Discharge of ABL Obligations has occurred, the Term Agent, on behalf of itself and the Term Lenders, agrees not to seek relief from the automatic stay or any other stay in any Insolvency Proceeding in respect of any portion of the ABL Priority Collateral without the ABL Agents express written consent. Until the Discharge of Term Obligations has occurred, the ABL Agent, on behalf of itself and the ABL Lenders, agrees not to seek relief from the automatic stay or any other stay in any Insolvency Proceeding in respect of any portion of the Term Priority Collateral without the Term Agents express written consent. In addition, neither the Term Agent nor the ABL Agent shall seek any relief from the automatic stay with respect to any Collateral without providing 3 days prior written notice to the other, unless such period is agreed by both the ABL Agent and the Term Agent to be modified or unless the ABL Agent or Term Agent, as applicable, makes a good faith determination that either (A) the ABL Priority Collateral or the Term Priority Collateral, as applicable, will decline speedily in value or (B) the failure to take any action will have a reasonable likelihood of endangering the ABL Agents or the Term Agents ability to realize upon its Collateral.
Section 6.3 No Contest; Adequate Protection.
(a) The Term Agent, on behalf of itself and the Term Lenders, agrees that, prior to the Discharge of ABL Obligations, none of them shall contest (or support any other Person contesting) (a) any request by the ABL Agent or any ABL Lender for adequate protection of its interest in the Collateral, (b) any proposed provision of DIP Financing by the ABL Agent and the ABL Lenders (or any other Person proposing to provide DIP Financing with the consent of the ABL Agent) or (c) any objection by the ABL Agent or any ABL Lender to any motion, relief, action, or proceeding based on a claim by the ABL Agent or any ABL Lender that its interests in the Collateral are not adequately protected (or any other
similar request under any law applicable to an Insolvency Proceeding), so long as any Liens granted to the ABL Agent as adequate protection of its interests are subject to this Agreement.
(b) The ABL Agent, on behalf of itself and the ABL Lenders, agrees that, prior to the Discharge of Term Obligations, none of them shall contest (or support any other Person contesting) (i) any request by the Term Agent or any Term Lender for adequate protection of its interest in the Collateral (unless in contravention of Section 6.1(a) above), or (ii) any objection by the Term Agent or any Term Lender to any motion, relief, action or proceeding based on a claim by the Term Agent or any Term Lender that its interests in the Collateral (unless in contravention of Section 6.1(a) above) are not adequately protected (or any other similar request under any law applicable to an Insolvency Proceeding), so long as any Liens granted to the Term Agent as adequate protection of its interests are subject to this Agreement.
(c) Notwithstanding the foregoing provisions in this Section 6.3, in any Insolvency Proceeding:
(i) if the ABL Secured Parties (or any subset thereof) are granted adequate protection with respect to the ABL Priority Collateral in the form of additional collateral (even if such collateral is not of a type which would otherwise have constituted ABL Priority Collateral), then the ABL Agent, on behalf of itself and the ABL Lenders, agrees that the Term Agent, on behalf of itself or any of the Term Lenders, may seek or request (and the ABL Secured Parties will not oppose such request) adequate protection with respect to its interests in such Collateral in the form of a Lien on the same additional collateral, which Lien will be subordinated to the Liens securing the ABL Obligations on the same basis as the other Liens of the Term Agent on ABL Priority Collateral; and
(ii) in the event the Term Agent, on behalf of itself or any of the Term Lenders, are granted adequate protection in respect of Term Priority Collateral in the form of additional collateral (even if such collateral is not of a type which would otherwise have constituted Term Priority Collateral), then the Term Agent, on behalf of itself and any of the Term Lenders, agrees that the ABL Agent on behalf of itself or any of the ABL Lenders, may seek or request (and the Term Secured Parties will not oppose such request) adequate protection with respect to its interests in such Collateral in the form of a Lien on the same additional collateral, which Lien will be subordinated to the Liens securing the Term Obligations on the same basis as the other Liens of the ABL Agent on Term Priority Collateral.
(iii) Except as otherwise expressly set forth in Section 6.1 or in connection with the exercise of remedies with respect to (A) the ABL Priority Collateral, nothing herein shall limit the rights of the Term Agent or the Term Lenders from seeking adequate protection with respect to their rights in the Term Priority Collateral in any Insolvency Proceeding (including adequate protection in the form of a cash payment, periodic cash payments or otherwise) or (B) the Term Priority Collateral, nothing herein shall limit the rights of the ABL Agent or the ABL Lenders from seeking adequate protection with respect to their rights in the ABL Priority Collateral in any Insolvency Proceeding (including adequate protection in the form of a cash payment, periodic cash payments or otherwise).
Section 6.4 Asset Sales. The Term Agent agrees, on behalf of itself and the Term Lenders, that it will not oppose any sale consented to by the ABL Agent of any ABL Priority Collateral pursuant to Section 363(f) of the Bankruptcy Code (or any similar provision under the law applicable to any Insolvency Proceeding) so long as the proceeds of such sale are applied in accordance with this Agreement. The ABL Agent agrees, on behalf of itself and the ABL Lenders, that it will not oppose any sale consented to by the Term Agent of any Term Priority Collateral pursuant to Section 363(f) of the Bankruptcy Code (or any similar provision under the law applicable to any Insolvency Proceeding) so long as the proceeds of such sale are applied in accordance with this Agreement. If such sale of Collateral includes both
ABL Priority Collateral and Term Priority Collateral, and if the Parties are unable after negotiating in good faith to agree on the allocation of the purchase price between the ABL Priority Collateral and Term Priority Collateral, either Party may apply to the court in such Insolvency Proceeding to make a determination of such allocation, and the courts determination shall be binding upon the Parties.
Section 6.5 Separate Grants of Security and Separate Classification. Each Term Lender, the Term Agent, each ABL Lender and the ABL Agent acknowledges and agrees that (i) the grants of Liens pursuant to the ABL Collateral Documents and the Term Collateral Documents constitute two separate and distinct grants of Liens and (ii) because of, among other things, their differing rights in the Collateral, the Term Obligations are fundamentally different from the ABL Obligations and must be separately classified in any plan of reorganization proposed or adopted in an Insolvency Proceeding. To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is held that the claims of the ABL Secured Parties and the Term Secured Parties in respect of the Collateral constitute only one secured claim (rather than separate classes of senior and junior secured claims), then the ABL Secured Parties and the Term Secured Parties hereby acknowledge and agree that all distributions shall be made as if there were separate classes of ABL Obligation claims and Term Obligation claims against the Loan Parties, with the effect being that, to the extent that the aggregate value of the ABL Priority Collateral or Term Priority Collateral is sufficient (for this purpose ignoring all claims held by the other Secured Parties), the ABL Secured Parties or the Term Secured Parties, respectively, shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of post-petition interest that is available from each pool of Priority Collateral for each of the ABL Secured Parties and the Term Secured Parties, respectively, before any distribution is made in respect of the claims held by the other Secured Parties from such Priority Collateral, with the other Secured Parties hereby acknowledging and agreeing to turn over to the respective other Secured Parties amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the aggregate recoveries.
Section 6.6 Enforceability. The provisions of this Agreement are intended to be and shall be enforceable under Section 510(a) of the Bankruptcy Code.
Section 6.7 ABL Obligations Unconditional. All rights of the ABL Agent hereunder, and all agreements and obligations of the Term Agent and the Loan Parties (to the extent applicable) hereunder, shall remain in full force and effect irrespective of:
(i) any lack of validity or enforceability of any ABL Document;
(ii) any change in the time, place or manner of payment of, or in any other term of, all or any portion of the ABL Obligations, or any amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding or restatement of any ABL Document;
(iii) any exchange, release, voiding, avoidance or non perfection of any security interest in any Collateral or any other collateral, or any release, amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding, restatement or increase of all or any portion of the ABL Obligations or any guarantee or guaranty thereof; or
(iv) any other circumstances that otherwise might constitute a defense available to, or a discharge of, any Loan Party in respect of the ABL Obligations, or of any of the Term Agent or any Loan Party, to the extent applicable, in respect of this Agreement.
Section 6.8 Term Obligations Unconditional. All rights of the Term Agent hereunder, and all agreements and obligations of the ABL Agent and the Loan Parties (to the extent applicable) hereunder, shall remain in full force and effect irrespective of:
(i) any lack of validity or enforceability of any Term Document;
(ii) any change in the time, place or manner of payment of, or in any other term of, all or any portion of the Term Obligations, or any amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding or restatement of any Term Document;
(iii) any exchange, release, voiding, avoidance or non perfection of any security interest in any Collateral, or any other collateral, or any release, amendment, waiver or other modification, whether by course of conduct or otherwise, or any refinancing, replacement, refunding, restatement or increase of all or any portion of the Term Obligations or any guarantee or guaranty thereof; or
(iv) any other circumstances that otherwise might constitute a defense available to, or a discharge of, any Loan Party in respect of the Term Obligations, or of any of the ABL Agent or any Loan Party, to the extent applicable, in respect of this Agreement.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Rights of Subrogation. The Term Agent, for and on behalf of itself and the Term Lenders, agrees that no payment to the ABL Agent or any ABL Lender pursuant to the provisions of this Agreement shall entitle the Term Agent or any Term Lender to exercise any rights of subrogation in respect thereof until the the ABL Obligations shall have been paid in full in cash. Following the payment in full in cash of the ABL Obligations, the ABL Agent agrees to execute such documents, agreements, and instruments as the Term Agent or any Term Lender may reasonably request to evidence the transfer by subrogation to any such Person of an interest in the ABL Obligations resulting from payments to the ABL Agent by such Person, so long as all costs and expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by the ABL Agent are paid by such Person upon request for payment thereof. The ABL Agent, for and on behalf of itself and the ABL Lenders, agrees that no payment to the Term Agent or any Term Lender pursuant to the provisions of this Agreement shall entitle the ABL Agent or any ABL Lender to exercise any rights of subrogation in respect thereof until the Term Obligations shall have been paid in full in cash. Following the payment in full in cash of the Term Obligations, the Term Agent agrees to execute such documents, agreements, and instruments as the ABL Agent or any ABL Lender may reasonably request to evidence the transfer by subrogation to any such Person of an interest in the Term Obligations resulting from payments to the Term Agent by such Person, so long as all costs and expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by the Term Agent are paid by such Person upon request for payment thereof.
Section 7.2 Further Assurances. The Parties will, at their own expense and at any time and from time to time, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that either Party may reasonably request, in order to protect any right or interest granted or purported to be granted hereby or to enable the ABL Agent or the Term Agent to exercise and enforce its rights and remedies hereunder; provided, however, that no Party shall be required to pay over any payment or distribution, execute any instruments or documents, or take any other action referred to in this Section 7.2, to the extent that such action would contravene any law, order or other legal requirement or any of the terms or provisions of this Agreement, and in the event of a
controversy or dispute, such Party may interplead any payment or distribution in any court of competent jurisdiction, without further responsibility in respect of such payment or distribution under this Section 7.2.
Section 7.3 Representations. The Term Agent represents and warrants to the ABL Agent that it has the requisite power and authority under the Term Documents to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the Term Lenders and that this Agreement shall be binding obligations of the Term Agent and the Term Lenders, enforceable against the Term Agent and the Term Lenders in accordance with its terms. The ABL Agent represents and warrants to the Term Agent that it has the requisite power and authority under the ABL Documents to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of itself and the ABL Lenders and that this Agreement shall be binding obligations of the ABL Agent and the ABL Lenders, enforceable against the ABL Agent and the ABL Lenders in accordance with its terms.
Section 7.4 Amendments. No amendment or waiver of any provision of this Agreement nor consent to any departure by any Party hereto shall be effective unless it is in a written agreement executed by the Term Agent and the ABL Agent, and, in the case of any amendment or waiver that would affect the rights and obligations of a Loan Party under this Agreement, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. It is understood that the ABL Agent and the Term Agent, without the consent of any other secured party under the ABL Credit Agreement or the Term Credit Agreement, may in their discretion determine that a supplemental agreement (which may take the form of an amendment and restatement of this Agreement) is necessary or appropriate (i) to facilitate having additional indebtedness or other obligations of any of the Credit Parties (as defined in each of the ABL Credit Agreement and the Term Credit Agreement, as applicable) become ABL Obligations or Term Obligations, as the case may be, under this Agreement or (ii) to effectuate the subordination of Liens securing any Permitted Refinancing Indebtedness (as defined in each of the ABL Credit Agreement and the Term Credit Agreement, as applicable) that is secured by junior Liens to the Liens on the Term Priority Collateral securing the ABL Obligations and to the Liens on the ABL Priority Collateral securing the Term Obligations (the indebtedness or other obligations described in clauses (i) and (ii), Additional Debt), which supplemental agreement shall, except in the case of Permitted Refinancing Indebtedness that is secured by junior Liens, specify whether such Additional Debt constitutes ABL Obligations or Term Obligations; provided that such supplemental agreement is not prohibited under any ABL Credit Agreement and any Term Credit Agreement then extant in accordance with the terms thereof.
Section 7.5 Addresses for Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, emailed or sent by overnight express courier service or United States mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of an email, a telecopy or three (3) days after deposit in the United States mail (certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto (until notice of a change thereof is delivered as provided in this Section) shall be as set forth below or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties.
ABL Agent: JPMorgan Chase Bank, N. A.
Chase Business Credit
10 South Dearborn Street
22nd Floor
Mail Code IL1-1190
Chicago, Illinois 60603
Attention: Olga Prado
Telecopy: (312) 377-1091
Email: olga.prado@chase.com
Term Agent: JPMorgan Chase Bank, N.A.
Loan and Agency Services Group
1111 Fannin, 10th Floor
Houston, Texas 77002
Attention: Agency Services
Telecopy: (713) 750-2782
Email: darren.cunningham@jpmchase.com
Section 7.6 No Waiver. Remedies. No failure on the part of any Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.
Section 7.7 Continuing Agreement; Transfer of Secured Obligations. This Agreement is a continuing agreement and shall (a) remain in full force and effect until the ABL Obligations have been paid in full in cash and all commitments to extend credit under the ABL Documents have been terminated and the Term Obligations shall have been paid in full in cash, (b) be binding upon the Parties and their successors, transferees and assigns, and (c) inure to the benefit of and be enforceable by the Parties and their respective successors, transferees and assigns. Except as set forth in Section 7.4, nothing herein is intended, or shall be construed to give, any other Person any right, remedy or claim under, to or in respect of this Agreement or any Collateral. All references to any Loan Party shall include any Loan Party as debtor-in-possession and any receiver or trustee for such Loan Party in any Insolvency Proceeding. Without limiting the generality of the foregoing clause (c), subject to any limitations in the applicable Credit Documents, the ABL Agent, any ABL Lender, the Term Agent, or any Term Lender may assign or otherwise transfer all or any portion of the ABL Obligations or the Term Obligations, as applicable, to any other Person (other than the Borrower, any Guarantor or any Affiliate of the Borrower or any Guarantor and any Subsidiary of the Borrower or any Guarantor), and such other Person shall thereupon become vested with all the rights and obligations in respect thereof granted to the ABL Agent, the Term Agent, any ABL Lender, or any Term Lender, as the case may be, herein or otherwise. The ABL Secured Parties and the Term Secured Parties may continue, at any time and without notice to the other parties hereto, to extend credit and other financial accommodations, lend monies and provide Indebtedness to, or for the benefit of, any Loan Party on the faith hereof.
Section 7.8 Governing Law; Entire Agreement. The validity, performance, and enforcement of this Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. This Agreement constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto.
Section 7.9 Counterparts. This Agreement may be executed in any number of counterparts, and it is not necessary that the signatures of all Parties be contained on any one counterpart hereof, each counterpart will be deemed to be an original, and all together shall constitute one and the same document. Delivery of an executed signature page to this Agreement by facsimile or other electronic transmission (in .pdf or similar format) shall be as effective as delivery of a manually signed counterpart of this Agreement.
Section 7.10 No Third Party Beneficiaries. This Agreement is solely for the benefit of the ABL Agent, ABL Lenders, Term Agent and Term Lenders. Except for amendments and waivers which require the consent of the Borrower pursuant to Section 7.4, no other Person (including the Borrower, any Guarantor or any Affiliate of the Borrower or any Guarantor, or any Subsidiary of the Borrower or any Guarantor) shall be deemed to be a third party beneficiary of this Agreement.
Section 7.11 Headings. The headings of the articles and sections of this Agreement are inserted for purposes of convenience only and shall not be construed to affect the meaning or construction of any of the provisions hereof.
Section 7.12 Severability. If any of the provisions in this Agreement shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement and shall not invalidate the Lien Priority or the application of Proceeds and other priorities set forth in this Agreement.
Section 7.13 Attorneys Fees. The Parties agree that if any dispute, arbitration, litigation, or other proceeding is brought with respect to the enforcement of this Agreement or any provision hereof, the prevailing party in such dispute, arbitration, litigation, or other proceeding shall be entitled to recover its reasonable attorneys fees and all other costs and expenses incurred in the enforcement of this Agreement, irrespective of whether suit is brought.
Section 7.14 VENUE, JURY TRIAL WAIVER.
(a) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT THEREFROM, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY ABL SECURED PARTY OR ANY TERM SECURED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY ABL DOCUMENTS OR ANY TERM DOCUMENTS AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(b) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY HERETO REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
(c) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.5. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Section 7.15 Intercreditor Agreement. This Agreement is the Intercreditor Agreement referred to in the ABL Credit Agreement and the Term Credit Agreement. Nothing in this Agreement shall be deemed to subordinate the obligations due to (i) any ABL Secured Party to the obligations due to any Term Secured Party or (ii) any Term Secured Party to the obligations due to any ABL Secured Party (in each case, whether before or after the occurrence of an Insolvency Proceeding), it being the intent of the Parties that this Agreement shall effectuate a subordination of Liens but not a subordination of Indebtedness.
Section 7.16 No Warranties or Liability. The Term Agent and the ABL Agent acknowledge and agree that neither has made any representation or warranty with respect to the execution, validity, legality, completeness, collectability or enforceability of any other ABL Document or any Term Document. Except as otherwise provided in this Agreement, the Term Agent and the ABL Agent will be entitled to manage and supervise their respective extensions of credit to any Loan Party in accordance with law and their usual practices, modified from time to time as they deem appropriate.
Section 7.17 Conflicts. In the event of any conflict between the provisions of this Agreement and the provisions of any ABL Document or any Term Document, the provisions of this Agreement shall govern.
Section 7.18 Information Concerning Financial Condition of the Loan Parties. Each of the Term Agent and the ABL Agent hereby assumes responsibility for keeping itself informed of the financial condition of the Loan Parties and all other circumstances bearing upon the risk of nonpayment of the ABL Obligations or the Term Obligations. Each of the Term Agent and the ABL Agent hereby agrees that no party shall have any duty to advise any other party of information known to it regarding such condition or any such circumstances. In the event that either the Term Agent or the ABL Agent, in its sole discretion, undertakes at any time or from time to time to provide any information to any other party to this Agreement, (a) it shall be under no obligation (i) to provide any such information to such other party or any other party on any subsequent occasion, (ii) to undertake any investigation not a part of its regular business routine, or (iii) to disclose any other information, (b) it makes no representation as to the accuracy or completeness of any such information and shall not be liable for any information contained therein, and (c) the Party receiving such information hereby agrees to hold the other Party harmless from any action the receiving Party may take or conclusion the receiving Party may reach or draw from any such information, as well as from and against any and all losses, claims, damages, liabilities, and expenses to which such receiving Party may become subject arising out of or in connection with the use of such information.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the ABL Agent, for and on behalf of itself and the ABL Lenders, and the Term Agent, for and on behalf of itself and the Term Lenders, have caused this Agreement to be duly executed and delivered as of the date first above written.
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JPMORGAN CHASE BANK, N.A., | |
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in its capacity as the ABL Agent | |
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By: |
/s/ Andrew Ray |
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Name: |
Andrew Ray |
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Title: |
Authorized Officer |
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JPMORGAN CHASE BANK, N.A., | |
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in its capacity as the Term Agent | |
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By: |
/s/ David L. Howard |
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Name: |
David L. Howard |
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Title: |
Authorized Officer |
SIGNATURE PAGE
INTERCREDITOR AGREEMENT- THE CONTAINER STORE, INC.
ACKNOWLEDGMENT
The Borrower and each Guarantor hereby acknowledges that it has received a copy of this Agreement and consents thereto, agrees to recognize all rights granted thereby to the ABL Agent, the ABL Lenders, the Term Agent, and the Term Lenders and will not do any act or perform any obligation which is not in accordance with the agreements set forth in this Agreement. The Borrower and each Guarantor further acknowledges and agrees that it is not an intended beneficiary or third party beneficiary under this Agreement and (i) as between the ABL Secured Parties, the Borrower and Guarantors, the ABL Documents remain in full force and effect as written and are in no way modified hereby, and (ii) as between the Term Secured Parties, the Borrower and Guarantors, the Term Documents remain in full force and effect as written and are in no way modified hereby.
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THE CONTAINER STORE, INC., as Borrower | |
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By: |
/s/ Melissa Reiff |
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Name: |
Melissa Reiff |
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Title: |
President |
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TCS HOLDINGS, INC., as Holdings | |
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By: |
/s/ Melissa Reiff |
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Name: |
Melissa Reiff |
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Title: |
President |
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TCS GIFT CARD SERVICES, LLC, | |
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as Subsidiary Guarantor | |
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By: |
/s/ Melissa Reiff |
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Name: |
Melissa Reiff |
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Title: |
President |
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TCS INSTALLATION SERVICES, LLC, | |
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as Subsidiary Guarantor | |
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By: |
/s/ Melissa Reiff |
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Name: |
Melissa Reiff |
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Title: |
President |
SIGNATURE PAGE
INTERCREDITOR AGREEMENT- THE CONTAINER STORE, INC.
Exhibit 10.12
Execution Version
CREDIT AGREEMENT
$75,000,000
Dated as of April 6, 2012
among
THE CONTAINER STORE, INC.,
as Borrower,
THE GUARANTORS PARTY HERETO
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and Collateral Agent,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Syndication Agent,
and
THE OTHER LENDERS PARTY HERETO
J.P. MORGAN SECURITIES LLC and
WELLS FARGO CAPITAL FINANCE, LLC,
as Joint Lead Arrangers
J.P. MORGAN SECURITIES LLC and
WELLS FARGO CAPITAL FINANCE, LLC,
as Joint Bookrunning Managers
TABLE OF CONTENTS
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Page |
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ARTICLE I |
DEFINITIONS AND ACCOUNTING TERMS |
1 |
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1.01 |
Defined Terms |
1 |
1.02 |
Other Interpretive Provisions |
49 |
1.03 |
Accounting Terms |
49 |
1.04 |
Rounding |
49 |
1.05 |
Times of Day |
50 |
1.06 |
Letter of Credit Amounts |
50 |
1.07 |
Senior Debt |
50 |
1.08 |
Available Amount Transactions |
50 |
1.09 |
Pro Forma Calculations |
50 |
|
|
|
ARTICLE II |
THE COMMITMENTS AND CREDIT EXTENSIONS |
51 |
|
|
|
2.01 |
Committed Loans; Reserves |
51 |
2.02 |
Borrowings, Conversions and Continuations of Committed Loans |
52 |
2.03 |
Letters of Credit |
55 |
2.04 |
Swing Line Loans |
66 |
2.05 |
Prepayments |
69 |
2.06 |
Termination or Reduction of Commitments |
70 |
2.07 |
Repayment of Loans |
71 |
2.08 |
Interest |
72 |
2.09 |
Fees |
72 |
2.10 |
Computation of Interest and Fees |
73 |
2.11 |
Evidence of Debt |
73 |
2.12 |
Payments Generally; Administrative Agents Clawback |
74 |
2.13 |
Sharing of Payments by Lenders |
76 |
2.14 |
Settlement Amongst Lenders |
76 |
2.15 |
Incremental Commitments |
77 |
2.16 |
Extension Offers |
78 |
|
|
|
ARTICLE III |
TAXES, YIELD PROTECTION AND ILLEGALITY |
81 |
|
|
|
3.01 |
Taxes |
81 |
3.02 |
Illegality |
85 |
3.03 |
Inability to Determine Rates |
85 |
3.04 |
Increased Costs |
85 |
3.05 |
Compensation for Losses |
87 |
3.06 |
Mitigation Obligations; Replacement of Lenders |
87 |
3.07 |
Survival |
88 |
|
|
|
ARTICLE IV |
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS |
88 |
|
|
|
4.01 |
Conditions of Initial Credit Extension |
88 |
4.02 |
Conditions to All Credit Extensions |
91 |
ARTICLE V |
REPRESENTATIONS AND WARRANTIES |
91 |
|
|
|
5.01 |
Existence, Qualification and Power |
91 |
5.02 |
Authorization; No Contravention |
92 |
5.03 |
Governmental Authorization; Other Consents |
92 |
5.04 |
Binding Effect |
92 |
5.05 |
Financial Statements; No Material Adverse Effect |
92 |
5.06 |
Litigation |
93 |
5.07 |
[reserved] |
93 |
5.08 |
Ownership of Property; Liens; Investments |
93 |
5.09 |
Environmental Matters |
94 |
5.10 |
Insurance |
95 |
5.11 |
Taxes |
95 |
5.12 |
ERISA Compliance |
95 |
5.13 |
Subsidiaries; Equity Interests; Loan Parties |
96 |
5.14 |
Margin Regulations; Investment Company Act |
97 |
5.15 |
Disclosure |
97 |
5.16 |
Compliance with Laws |
97 |
5.17 |
Intellectual Property; Licenses, Etc. |
97 |
5.18 |
Solvency |
97 |
5.19 |
Casualty, Etc. |
98 |
5.20 |
Labor Matters |
98 |
5.21 |
Collateral Documents |
98 |
5.22 |
USA PATRIOT Act |
98 |
|
|
|
ARTICLE VI |
AFFIRMATIVE COVENANTS |
99 |
|
|
|
6.01 |
Financial Statements and Other Reports |
99 |
6.02 |
Certificates; Other Information |
100 |
6.03 |
Notices |
103 |
6.04 |
Payment of Obligations |
104 |
6.05 |
Preservation of Existence, Etc. |
104 |
6.06 |
Maintenance of Properties |
105 |
6.07 |
Maintenance of Insurance |
105 |
6.08 |
Compliance with Laws |
107 |
6.09 |
Books and Records |
107 |
6.10 |
Inspection Rights |
107 |
6.11 |
Use of Proceeds |
108 |
6.12 |
Covenant to Guarantee Obligations and Give Security |
108 |
6.13 |
Cash Management |
110 |
6.14 |
Physical Inventories |
111 |
6.15 |
Further Assurances |
111 |
6.16 |
Lenders Meetings |
112 |
6.17 |
Designation as Senior Debt |
112 |
6.18 |
Designation of Subsidiaries |
112 |
6.19 |
Post-Closing Matters |
113 |
ARTICLE VII |
NEGATIVE COVENANTS |
113 |
|
| |
7.01 |
Liens |
113 |
7.02 |
Indebtedness |
115 |
7.03 |
Investments |
117 |
7.04 |
Fundamental Changes |
121 |
7.05 |
Dispositions |
122 |
7.06 |
Restricted Payments |
123 |
7.07 |
Change in Nature of Business |
125 |
7.08 |
Transactions with Affiliates |
125 |
7.09 |
Burdensome Agreements |
126 |
7.10 |
Amendments of Material Indebtedness |
127 |
7.11 |
Accounting Changes |
127 |
7.12 |
Prepayments, Etc. of Indebtedness |
128 |
7.13 |
Holding Company |
128 |
7.14 |
Deposit Accounts |
128 |
7.15 |
Consolidated Fixed Charge Coverage Ratio |
129 |
7.16 |
Sale and Leaseback Transactions |
129 |
|
|
|
ARTICLE VIII |
EVENTS OF DEFAULT AND REMEDIES |
129 |
|
| |
8.01 |
Events of Default |
129 |
8.02 |
Remedies upon Event of Default |
132 |
8.03 |
Application of Funds |
133 |
|
|
|
ARTICLE IX |
ADMINISTRATIVE AGENT |
134 |
|
|
|
9.01 |
Appointment and Authority |
134 |
9.02 |
Rights as a Lender |
135 |
9.03 |
Exculpatory Provisions |
135 |
9.04 |
Reliance by Agents |
136 |
9.05 |
Delegation of Duties |
136 |
9.06 |
Resignation of Agents |
136 |
9.07 |
Non-Reliance on Agents and Other Lenders |
137 |
9.08 |
No Other Duties, Etc. |
137 |
9.09 |
Administrative Agent May File Proofs of Claim |
137 |
9.10 |
Collateral and Guaranty Matters |
138 |
9.11 |
Notice of Transfer |
139 |
9.12 |
Reports and Financial Statements |
139 |
9.13 |
Agency for Perfection |
140 |
9.14 |
Indemnification of Agents |
140 |
9.15 |
Withholding Tax |
140 |
9.16 |
Relation Among Lenders |
141 |
|
|
|
ARTICLE X |
CONTINUING GUARANTY |
141 |
|
|
|
10.01 |
Guaranty |
141 |
10.02 |
Rights of Lenders |
141 |
10.03 |
Certain Waivers |
141 |
10.04 |
Obligations Independent |
142 |
10.05 |
Subrogation |
142 |
10.06 |
Termination; Reinstatement |
142 |
10.07 |
Subordination |
142 |
10.08 |
Stay of Acceleration |
143 |
10.09 |
Condition of Borrower |
143 |
|
|
|
ARTICLE XI |
MISCELLANEOUS |
143 |
|
|
|
11.01 |
Amendments, Etc. |
143 |
11.02 |
Notices; Effectiveness; Electronic Communications |
146 |
11.03 |
No Waiver; Cumulative Remedies |
148 |
11.04 |
Expenses; Indemnity; Damage Waiver |
148 |
11.05 |
Payments Set Aside |
150 |
11.06 |
Successors and Assigns |
150 |
11.07 |
Treatment of Certain Information; Confidentiality |
155 |
11.08 |
Right of Setoff |
156 |
11.09 |
Interest Rate Limitation |
156 |
11.10 |
Counterparts; Integration; Effectiveness |
157 |
11.11 |
Survival of Representations and Warranties |
157 |
11.12 |
Severability |
157 |
11.13 |
Replacement of Lenders |
157 |
11.14 |
Governing Law; Jurisdiction; Etc. |
158 |
11.15 |
WAIVER OF JURY TRIAL |
159 |
11.16 |
No Advisory or Fiduciary Responsibility |
159 |
11.17 |
USA PATRIOT Act Notice |
160 |
11.18 |
No Strict Construction |
160 |
11.19 |
Attachments |
160 |
11.20 |
Intercreditor Agreement |
161 |
SIGNATURES |
S-1 |
SCHEDULES | |
|
|
2.01 |
Commitments and Applicable Percentages |
2.03(m) |
Existing Letters of Credit |
5.01 |
Organization Information |
5.08(c) |
Owned Real Estate |
5.08(d)(i) |
Leased Real Estate (Lessee) |
5.08(d)(ii) |
Leased Real Estate (Lessor) |
5.08(e) |
Existing Investments |
5.10 |
Insurance |
5.13 |
Subsidiaries and Other Equity Investments |
5.17 |
Intellectual Property Rights |
6.12 |
Guarantors |
6.13 |
Credit Card Arrangements |
7.01(b) |
Existing Liens |
7.02 |
Existing Indebtedness |
7.09 |
Burdensome Agreements |
11.02 |
Administrative Agents Office, Certain Addresses for Notices |
|
|
EXHIBITS | |
|
|
Form of |
|
|
|
A-1 |
Committed Loan Notice |
A-2 |
Conversion/Continuation Notice |
B |
Swing Line Loan Notice |
C |
Intercreditor Agreement |
D |
Compliance Certificate |
E |
Form of Note |
F |
Assignment and Assumption |
H-1 |
Perfection Certificate |
H-2 |
Perfection Certificate Supplement |
I |
Borrowing Base Certificate |
J |
Credit Card Notification |
K |
Blocked Account Agreement |
L |
Collateral Access Agreement |
M-1 |
U.S. Tax Certificate For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes |
M-2 |
U.S. Tax Certificate For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes |
M-3 |
U.S. Tax Certificate For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes |
M-4 |
U.S. Tax Certificate For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes |
CREDIT AGREEMENT
This CREDIT AGREEMENT (Agreement) is entered into as of April 6, 2012, among THE CONTAINER STORE, INC., a Texas corporation (the Borrower), the Guarantors party hereto, each lender from time to time party hereto (collectively, the Lenders and individually, a Lender), JPMORGAN CHASE BANK, N.A. (JPMCB), as Administrative Agent and Collateral Agent, J.P. MORGAN SECURITIES LLC and WELLS FARGO CAPITAL FINANCE, LLC, as Joint Lead Arrangers, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Syndication Agent.
PRELIMINARY STATEMENTS:
TCS Holdings, Inc., a Delaware corporation (Holdings), and the Borrower have requested that the Lenders establish a $75.0 million revolving credit facility with the Borrower to provide ongoing working capital and for other general corporate purposes of the Borrower and its Subsidiaries, and the Lenders have indicated their willingness to lend, on the terms and subject to the conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:
Accounts means accounts as defined in the UCC, and also means a right to payment of a monetary obligation, whether or not earned by performance, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a policy of insurance issued or to be issued, (d) for a secondary obligation incurred or to be incurred, or (e) arising out of the use of a credit or charge card or information contained on or for use with the card.
ACH means automated clearing house transfers.
Adjustment Date means the first day of each Fiscal Quarter of Holdings, commencing the first day of the first full Fiscal Quarter of Holdings occurring after the Closing Date.
Administrative Agent means JPMCB in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent as provided in Section 9.06.
Administrative Agents Office means the Administrative Agents address and, as appropriate, account as set forth on Schedule 11.02, 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 means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.
Agent Parties has the meaning specified in Section 11.02(c).
Agents means, collectively, the Administrative Agent and the Collateral Agent.
Aggregate Commitments means, at any time, the sum of the Commitments of all the Lenders at such time. As of the Closing Date, the Aggregate Commitments are $75.0 million.
Agreement has the meaning specified in the introductory paragraph hereto, as amended, restated, modified or supplemented from time to time in accordance with the terms hereof.
Applicable Margin means, with respect to Loans:
(a) From and after the Closing Date until the first Adjustment Date, the percentages set forth in Level II of the pricing grid below; and
(b) From and after the first Adjustment Date, the Applicable Margin shall be determined from the following pricing grid based upon the Average Daily Excess Availability for the most recent Fiscal Quarter of Holdings ended immediately preceding such Adjustment Date; provided, however, that notwithstanding anything to the contrary set forth herein, upon the occurrence of an Event of Default, the Applicable Margin, at the option of the Administrative Agent or at the direction of the Required Lenders, shall be immediately increased to that set forth in Level III (even if the Average Daily Excess Availability requirements for a different Level have been met) and interest shall accrue at the Default Rate as long as such Event of Default is continuing.
|
|
Average Daily |
|
LIBO Applicable |
|
Base Rate |
|
Level |
|
Excess Availability |
|
Margin |
|
Applicable Margin |
|
I |
|
Greater than $45.0 million |
|
1.25 |
% |
0.25 |
% |
II |
|
Less than or equal to $45.0 million but greater than $20.0 million |
|
1.50 |
% |
0.50 |
% |
III |
|
Less than or equal to $20.0 million |
|
1.75 |
% |
0.75 |
% |
Applicable Percentage means, with respect to any Lender, at any time, the percentage (carried out to the fourth decimal place) of the Aggregate Commitments represented by such Lenders Commitment at such time. If the commitment of each Lender to make Loans and the obligation of any L/C Issuer to make L/C Credit Extensions have been terminated
pursuant to Section 8.02 or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments. The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto. Notwithstanding the foregoing, in the case of Section 2.03(n) when a Defaulting Lender shall exist, Applicable Percentage as used in such Section 2.03(n) with respect to any non-Defaulting Lender shall mean the percentage of the Aggregate Commitments (disregarding any Defaulting Lenders Commitments) represented by such non-Defaulting Lenders Commitment.
Appraised Value Percentage means the net appraised recovery value of the Borrowers and the Subsidiary Guarantors Inventory as set forth in the Borrowers accounting ledger (expressed as a percentage of the cost of such Inventory) as reasonably determined from time to time by reference to the most recent appraisal received by the Administrative Agent conducted by an independent appraiser reasonably satisfactory to the Administrative Agent.
Approved Fund means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
Arrangers means J.P. Morgan Securities LLC and Wells Fargo Capital Finance, LLC, in their capacities as joint lead arrangers and joint bookrunning managers.
Assignee Group means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.
Assignment and Assumption means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.06(b)(iii)), and accepted by the Administrative Agent, in substantially the form of Exhibit F or any other form approved by the Administrative Agent.
Attributable Indebtedness means, on any date, (a) in respect of any Capital Lease Obligations of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease or similar payments under the relevant lease or other applicable agreement or instrument that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease or other agreement or instrument were accounted for as a Capital Lease Obligation and (c) all Synthetic Debt of such Person.
Audited Financial Statements means the audited Consolidated balance sheets and related statements of income, stockholders equity and cash flows for the 2008, 2009 and 2010 Fiscal Years for Holdings ended February 28, 2009, February 27, 2010 and February 26, 2011 (including its Consolidated Subsidiaries) (in each case prepared in accordance with GAAP).
Availability Period means the period from and including the Closing Date to the earliest of (a) the Maturity Date, (b) the date of termination of the Aggregate Commitments pursuant to Section 2.06, and (c) the date of termination of the Commitment of each Lender to make Loans and of the obligation of any L/C Issuer to make L/C Credit Extensions pursuant to Section 8.02.
Availability Reserves means, without duplication of any other Reserves or items that are otherwise addressed or excluded through eligibility criteria, an amount, if any, established in the Administrative Agents reasonable discretion, equal to the sum of (a) the amount of all sales taxes that have been collected by the Borrower and Subsidiary Guarantors and not remitted to any state taxing authority when due, (b) an amount equal to two (2) months gross rent for each leased Store or distribution center of the Borrower and the Subsidiary Guarantors located in a Landlord Lien State (consistent with the Administrative Agents usual practices) other than those Stores and distribution centers with respect to which the Collateral Agent has received a Collateral Access Agreement, (c) 50% of Customer Credit Liabilities, (d) an amount based on rent which is past due for more than ten days for any of the Borrowers or Subsidiary Guarantors leased locations, with the exception of past due rent that is the subject of a Permitted Protest as determined by the Administrative Agent in its reasonable discretion, (e) such other reserves established in the Administrative Agents reasonable discretion relating to obligations of the Loan Parties in respect of Bank Products (including Swap Contracts) and Cash Management Services, (f) such other reserves established in the Administrative Agents reasonable discretion which are reasonably required pursuant to this Agreement, including, without limitation, reserves implemented in connection with Permitted Liens, Permitted Encumbrances, and Permitted Indebtedness, but in the case of each of the foregoing, only to the extent such Liens, encumbrances and Indebtedness relate or in any way affect the Borrowing Base, and (g) reserves implemented in order to protect the Credit Parties from any Liens, encumbrances or claims that could, in the reasonable judgment of the Administrative Agent, take priority over the Liens of the Collateral Agent in the Collateral.
Availability Triggering Event means either (a) the occurrence of a Liquidity Event, or (b) the occurrence of (i) an Event of Default under Section 8.01(a) or 8.01(g), (ii) an Event of Default arising from a failure to make any delivery required by Section 6.02(c) and the failure has continued for 10 days after such delivery is required to be made or (iii) to the extent arising due to an event under the Term Facility, an Event of Default under Section 8.01(f)(i)(A).
Available Amount means, at any time, (a) Excess Cash Flow generated in each Fiscal Year of Holdings beginning with the Fiscal Year ending February 23, 2013, to the extent the financial statements for each such Fiscal Year shall have been delivered pursuant to Section 6.01(a), plus (b) net cash proceeds received by Holdings from the issuance after the Closing Date by Holdings of Equity Interests in Holdings (other than (i) proceeds from Specified Equity Contributions, (ii) proceeds from the issuance of Equity Interests in Holdings that were used finance substantially concurrent Investments pursuant to Section 7.03(k), and (iii) proceeds from issuances of Disqualified Equity Interests in Holdings), plus (c) to the extent the Borrower or a Restricted Subsidiary has made any Investment pursuant to Section 7.03(l), the net amount of any return on such Investment (whether through dividends, distributions, sale, cash repayments of principal, or other disposition of such Investment) actually received by the Borrower or a Restricted Subsidiary from such Investment, minus (d) any prepayments out of such Excess Cash
Flow (or any similar term under the Term Facility) so generated that are or shall be required to be made under the Term Facility in respect of such Excess Cash Flow (or any similar term under the Term Facility), minus (e) the aggregate amount of (x) Investments made pursuant to Section 7.03(m), (y) Restricted Payments made pursuant to Section 7.06(e), and (z) repayments of Indebtedness made pursuant to Section 7.12(b) prior to such time.
Average Daily Excess Availability means the average daily Excess Availability for the immediately preceding Fiscal Quarter of Holdings.
Bank Products means any services or facilities provided to any Loan Party by any Agent, Lender, Former Lender or any Affiliate of an Agent, Lender or Former Lender (but excluding Cash Management Services) on account of (a) Swap Contracts, (b) purchase cards, and (c) merchant services constituting a line of credit.
Base Rate means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus ½ of 1%, and (c) the LIBO Rate for a one month interest period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%, provided that, for the avoidance of doubt, the LIBO Rate for any day shall be based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute page) at approximately 11:00 a.m. London time on such day (without any rounding). Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Rate or the LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Rate or the LIBO Rate, respectively.
Base Rate Committed Loan means a Committed Loan that is a Base Rate Loan.
Base Rate Loan means a Loan that bears interest based on the Base Rate.
Blocked Account has the meaning provided in Section 6.13(a)(ii).
Blocked Account Agreement has the meaning provided in Section 6.13(a)(ii).
Blocked Account Bank means each bank with whom deposit accounts are maintained in which any funds of any of the Loan Parties from one or more DDAs are concentrated, and, in each case, with whom a Blocked Account Agreement has been, or is required to be, executed in accordance with the terms hereof.
Borrower has the meaning specified in the introductory paragraph hereto.
Borrower Materials has the meaning provided in Section 6.02.
Borrowing means a Committed Borrowing (including the borrowing of an Extended Loan) or a Swing Line Borrowing, as the context may require.
Borrowing Base means, at any time of calculation, an amount equal to:
(a) the Credit Card Receivables Component; plus
(b) the Inventory Component; minus
(c) the then amount of all Availability Reserves.
Borrowing Base Certificate has the meaning provided in Section 6.02(c).
Business Day means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agents Office is located and, if such day relates to any LIBO Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank market.
Capital Expenditures means, with respect to any Person for any period, any expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations) which is, or should be in accordance with GAAP, reflected as a capital expenditure in a Consolidated statement of cash flows of such Person for the period in which such expenditure occurs, provided that Capital Expenditures shall not include (a) any such expenditures which are contractually required to be, and are, reimbursed to the Loan Parties in cash by landlords with respect to such period of calculation, (b) any such expenditure with the proceeds from any casualty insurance or condemnation or eminent domain, to the extent that the proceeds therefrom are utilized for Capital Expenditures within twelve months of the receipt of such proceeds, (c) any such expenditure with the proceeds or consideration received from any trade in of any Loan Partys assets, or (d) any such expenditures which constitute a Permitted Acquisition.
Capital Lease Obligations means, with respect to any Person, the obligation of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP as in effect on the Closing Date, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP as in effect on the Closing Date.
Cash Collateralize has the meaning specified in Section 2.03(g).
Cash Dominion Event means the occurrence of any Availability Triggering Event. For purposes of this Agreement, the occurrence of a Cash Dominion Event shall be deemed continuing at the Administrative Agents option (a) so long as the Event of Default giving rise to the Availability Triggering Event is continuing, and/or (b) if the Cash Dominion Event arises as a result of the occurrence of a Liquidity Event, until Excess Availability has exceeded $10.0 million for 30 consecutive days, in which case a Cash Dominion Event shall no longer be deemed to be continuing for purposes of this Agreement.
Cash Equivalents means any of the following types of Investments, to the extent owned by Holdings, the Borrower, or any of their respective Restricted Subsidiaries:
(a) readily marketable obligations issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof having maturities of not more than 360 days from the date of acquisition thereof; provided that the full faith and credit of the United States of America is pledged in support thereof;
(b) time deposits with, or insured certificates of deposit or bankers acceptances of, any commercial bank that (i) (A) is a Lender that offers such deposits, certificates of deposit or bankers acceptances in the ordinary course of such Lenders business or (B) is organized under the laws of the United States of America, any state thereof or the District of Columbia or is the principal banking subsidiary of a bank holding company organized under the laws of the United States of America, any state thereof or the District of Columbia, and is a member of the Federal Reserve System, (ii) issues (or the parent of which issues) commercial paper rated as described in clause (c) of this definition and (iii) has combined capital and surplus of at least $1.0 billion, in each case with maturities of not more than 180 days from the date of acquisition thereof;
(c) commercial paper issued by any Person organized under the laws of any state of the United States of America and rated at least Prime-1 (or the then equivalent grade) by Moodys or at least A-1 (or the then equivalent grade) by S&P, in each case with maturities of not more than 180 days from the date of acquisition thereof;
(d) Investments, classified in accordance with GAAP as current assets of Holdings, the Borrower, or any of their respective Restricted Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, which are administered by financial institutions that have the highest rating obtainable from either Moodys or S&P, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in clauses (a), (b) and (c) of this definition; and
(e) in the case of any Foreign Subsidiary, investments of comparable tenor and credit quality to those described in the foregoing clauses (a) through (d) customarily utilized in countries in which such Foreign Subsidiary operates for short term cash management purposes.
Cash Management Services means any one or more of the following types of services or facilities provided to any Loan Party by any Agent, Lender, Former Lender or any Affiliate of an Agent, Lender or Former Lender: (a) ACH transactions, (b) cash management services, including, without limitation, controlled disbursement services, treasury, depository, overdraft, and electronic funds transfer services, (c) foreign exchange facilities, (d) credit or debit cards, and (e) merchant services not constituting a Bank Product.
CERCLA means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.
CERCLIS means the Comprehensive Environmental Response, Compensation and Liability Information System maintained by the U.S. Environmental Protection Agency.
CFC means a Person that is a controlled foreign corporation under Section 957 of the Code.
Change in Law means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the date enacted, adopted or issued.
Change of Control means an event or series of events by which:
(a) at any time prior to the creation of a Public Market, the Sponsor, Affiliates of the Sponsor (other than any portfolio company thereof) and the Management Stockholders (collectively, the Permitted Holders) shall cease to own and control legally and beneficially, either directly or indirectly, equity securities in Holdings representing more than 50% of the combined voting power of all equity securities entitled to vote for members of the board of directors or equivalent governing body of Holdings on a fully-diluted basis (and taking into account all such securities that the Permitted Holders have the right to acquire pursuant to any option right (as defined in clause (b) below)); or
(b) at any time upon or after the creation of a Public Market, any person or group (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such Person or its subsidiaries, and any Person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan that in each case is not acting in concert with another Person) other than the Permitted Holders becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have beneficial ownership of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an option right)), directly or indirectly, of the greater of (x) 35% or more of the equity securities of Holdings entitled to vote for members of the board of directors or equivalent governing body of Holdings on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right) and (y) a percentage that is greater than the percentage of the equity securities of Holdings entitled to vote for members of the board of directors or equivalent governing body of Holdings that is then beneficially owned by the Permitted Holders; or
(c) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of Holdings cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or
(d) Holdings shall cease, directly or indirectly, to own and control legally and beneficially all of the Equity Interests in the Borrower; or
(e) a change of control or any comparable term under, and as defined in, the Term Loan Documents or any other instrument, document or agreement governing Material Indebtedness shall have occurred, in any case that gives the holders thereof the right to require Holdings or any of its Subsidiaries to repurchase, offer to repurchase or immediately repay such Indebtedness.
Class when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Existing Loans, Extended Loans (of the same Extension Series) or Swing Line Loans, when used in reference to any Commitment, refers to whether such Commitment is an Existing Commitment, an Extended Commitment (of each Extension Series) or a Swing Line Commitment and when used in reference to any Lender, refers to whether such Lender has a Loan or Commitment with respect to a single class.
Closing Date means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 11.01.
Code means the Internal Revenue Code of 1986, as amended.
Collateral means all of the Collateral and Mortgaged Property or Trust Property, as applicable, referred to in the Collateral Documents and all of the other property that is or is intended under the terms of the Collateral Documents to be subject to Liens in favor of the Collateral Agent for the benefit of the Credit Parties.
Collateral Access Agreement means an agreement substantially in the form of Exhibit L.
Collateral Agent means JPMCB in its capacity as collateral agent under any of the Loan Documents, or any successor collateral agent as provided in Section 9.06.
Collateral Documents means, collectively, the Security Agreement, the Pledge Agreement, the Swedish Pledge Agreement, the Intellectual Property Security Agreement, the Mortgages, the Blocked Account Agreements, the Intercreditor Agreement, each of the Mortgages, collateral assignments, security agreements, pledge agreements, control agreements or other similar agreements delivered to the Collateral Agent pursuant to Sections 6.12, and 6.13,
and each of the other agreements, instruments or documents that creates or purports to create a Lien in favor of the Collateral Agent for the benefit of the Credit Parties.
Commercial Letter of Credit means any Letter of Credit issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by the Borrower or a Subsidiary Guarantor in the ordinary course of business of such Borrower or Subsidiary Guarantor.
Commitment means, as to each Lender, its obligation to (a) make Committed Loans to the Borrower pursuant to Section 2.01, (b) purchase participations in L/C Obligations, (c) purchase participations in Swing Line Loans and (d) if such Lender is an Extending Lender, make Extended Loans to the Borrower pursuant to Section 2.01, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lenders name on Schedule 2.01 under the caption Commitment or in the applicable Incremental Assumption Agreement or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement including, without limitation, pursuant to Section 2.15. Unless the context shall otherwise requires, the term Commitment shall include any Incremental Loan Commitment and Extended Commitment of such Lender.
Commitment Fee has the meaning specified in Section 2.09(a).
Committed Borrowing means a borrowing consisting of simultaneous Committed Loans of the same Type and, in the case of LIBO Rate Loans, having the same Interest Period made by each of the Lenders pursuant to Section 2.01.
Committed Loan has the meaning specified in Section 2.01, and shall include each Extended Loan made in extension thereof in accordance with Section 2.16.
Committed Loan Notice means a notice of a Committed Borrowing, which, if in writing, shall be substantially in the form of Exhibit A-1.
Compliance Certificate means a certificate substantially in the form of Exhibit D.
Concentration Account has the meaning provided in Section 6.13(b).
Consolidated means, when used to modify a financial term, test, statement, or report of a Person, the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of such Person and its Subsidiaries.
Consolidated EBITDA means, at any date of determination, an amount equal to Consolidated Net Income of Holdings and its Restricted Subsidiaries for the most recently completed Measurement Period plus (a) the following to the extent deducted in calculating Consolidated Net Income for such Measurement Period: (i) Consolidated Interest Charges, (ii) the provision for Federal, state, local and foreign income taxes payable, (iii) depreciation and amortization expense, (iv) non-cash stock compensation paid to officers, directors, employees or
consultants during such Measurement Period, (v) all non-cash losses from Dispositions during such Measurement Period, other than Dispositions of inventory in the ordinary course of business, (vi) Transaction Expenses, (vii) expenses incurred in connection with the prepayment, amendment, or refinancing of Indebtedness during such Measurement Period, (viii) non-cash expenses related to LIFO/LCM reserves and non-cash rent, (ix) any non-cash purchase accounting adjustments made in connection with any acquisition permitted by this Agreement, (x) Management Fees for such Measurement Period, (xi) expenses incurred during such Measurement Period in connection with closed stores, store closings and store relocations in an amount not to exceed $5.0 million in the aggregate in such Measurement Period, (xii) all transactional costs, expenses and charges payable to non-Affiliated third parties and made at the time of, and in connection with, any acquisition (whether or not consummated) in an amount not to exceed $5.0 million in the aggregate during such Measurement Period, (xiii) any expenses or charges related to any issuance of Equity Interests, Investment, acquisition, disposition, recapitalization or the incurrence or repayment of Indebtedness (including with respect to Indebtedness, a refinancing thereof, whether or not successful), in each case permitted to be incurred or made hereunder and any amendment or modification to the terms of any such transactions, including such fees, expenses or charges related to the Transaction, (xiv) non-cash losses (minus any non-cash gains) with respect to Swap Contracts during such Measurement Period, (xv) extraordinary, unusual or non-recurring expenses, charges or losses during such period (as determined by the Borrower in good faith, it being understood that Item 10(e) of Regulation S-K under the Securities Act shall not constitute a limitation on any such determination), and (xvi) pre-opening and grand opening expenses in an amount not to exceed $10.0 million in such Measurement Period; and minus (b) (i) to the extent included in calculating Consolidated Net Income for such Measurement Period, all non-recurring, non-cash items increasing Consolidated Net Income (excluding any non-cash items that result in an accrual of a reserve for cash items in any future period) (in each case of or by Holdings and its Restricted Subsidiaries for such Measurement Period), and (ii) non-cash gains from Dispositions other than Dispositions of inventory in the ordinary course of business, provided that Consolidated EBITDA shall be deemed to be $24,906,050, $7,621,086, $16,544,906 and $21,820,837 for the Fiscal Quarters ended February 26, 2011, May 28, 2011, August 27, 2011 and November 26, 2011, respectively (without pro forma adjustments for the acquisition of TCS Installation Services, LLC).
Consolidated Fixed Charge Coverage Ratio means, at any date of determination, the ratio of (a) (i) Consolidated EBITDA for the most recently completed Measurement Period plus (ii) for the purposes of Section 7.15 only, Specified Equity Contributions made during such Measurement Period minus (iii) Capital Expenditures made in such Measurement Period to (b) the sum of (i) Debt Service Charges for such Measurement Period plus (ii) the aggregate amount of all scheduled mandatory cash payments on Disqualified Equity Interests made during such Measurement Period, in each case, of or by Holdings and its Restricted Subsidiaries, all as determined on a Consolidated basis in accordance with GAAP.
Consolidated Interest Charges means, for any Measurement Period, Consolidated interest expense (net of interest income) of Holdings and its Restricted Subsidiaries determined in accordance with GAAP.
Consolidated Leverage Ratio means, as of any date of determination, the ratio of (a) Total Debt as of such date to (b) Consolidated EBITDA for the most recently completed Measurement Period.
Consolidated Net Income means, at any date of determination, the net income (or loss) of Holdings and its Restricted Subsidiaries on a Consolidated basis for the most recently completed Measurement Period; provided that Consolidated Net Income shall exclude (a) extraordinary non-cash gains and extraordinary non-cash losses for such Measurement Period, (b) the net income of any Subsidiary during such Measurement Period to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary of such income is not permitted by operation of the terms of its Organization Documents or any agreement, instrument or Law applicable to such Subsidiary during such Measurement Period (provided, that this clause (b) shall not, with respect to any Foreign Subsidiary, exclude income that can only be distributed following the adoption of the relevant annual accounts or Consolidated annual accounts for such Foreign Subsidiarys Fiscal Year), except that Consolidated Net Income shall be reduced to the extent of any equity held by Holdings or any of its Restricted Subsidiaries in any net loss of any such Subsidiary for such Measurement Period, (c) the income (or loss) of any Person during such Measurement Period and accrued prior to the date it becomes a Subsidiary of Holdings or its Restricted Subsidiaries or is merged into or Consolidated with Holdings or a Restricted Subsidiary or that Persons assets are acquired by Holdings or any of its Restricted Subsidiaries, (d) any income (or loss) for such period of any Person if such Person is not a Restricted Subsidiary of Holdings, except that Consolidated Net Income shall be increased by the aggregate amount of cash actually distributed by such Person during such Measurement Period to Holdings or a Restricted Subsidiary as a dividend or other distribution (and in the case of a dividend or other distribution to a Restricted Subsidiary which is not a Loan Party, such Restricted Subsidiary is not precluded from further distributing such amount to the Borrower as described in clause (b) of this proviso), and (e) the cumulative effect of changes in accounting principles.
Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.
Control means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. Controlling and Controlled have meanings correlative thereto.
Conversion/Continuation Notice means a notice of (a) a conversion of Loans from one Type to the other, or (b) a continuation of LIBO Rate Loans, pursuant to Section 2.02(b), which, if in writing, shall be substantially in the form of Exhibit A-2.
Cost means the calculated cost of purchases, based upon the Borrowers and Subsidiary Guarantors accounting practices, known to the Administrative Agent, which practices are in effect on the Closing Date as such calculated cost is determined from invoices received by the Borrower and the Subsidiary Guarantors, the Borrowers and Subsidiary Guarantors purchase journals or the Borrowers and Subsidiary Guarantors stock ledger.
Cost includes inventory capitalization costs and other non-purchase price charges (such as duty, brokerage, freight and expenses related to design, raw material procurement and quality control) used in the Borrowers or the Subsidiary Guarantors calculation of cost of goods sold.
Covenant Compliance Event means Excess Availability at any time is less than $10.0 million.
Credit Card Advance Rate means 90%.
Credit Card Notifications has the meaning provided in Section 6.13(a)(i).
Credit Card Receivables Component means the face amount of Eligible Credit Card Receivables multiplied by the Credit Card Advance Rate.
Credit Extensions mean each of the following: (a) a Borrowing and (b) an L/C Credit Extension.
Credit Party means, individually, and Credit Parties means collectively, the following: (a) the Lenders and their Affiliates, (b) the Agents, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.05, (c) each L/C Issuer, (d) the Arrangers, (e) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document, (f) any other Person to whom Obligations under this Agreement and other Loan Documents are owing and (g) the successors and assigns of each of the foregoing.
Credit Party Expenses means, without limitation, (a) all reasonable and documented in reasonable detail out-of-pocket expenses incurred by the Agents, the Arrangers and their respective Affiliates, in connection with this Agreement and the other Loan Documents, including without limitation (i) the reasonable and documented in reasonable detail fees, charges and disbursements of (A) counsel for the Agents and the Arrangers, provided that the Agents and the Arrangers shall be entitled to be reimbursed for no more than one counsel and, if reasonably necessary, for one local counsel in each relevant jurisdiction material to the interest of the Lenders, in each case, selected by the Agent, absent a conflict of interest between any of such Persons where the affected Persons inform the Borrower of such conflict, in which case the affected Persons may engage and be reimbursed for one additional counsel, (B) outside consultants for the Agents, (C) appraisers, (D) collateral field examinations and (E) all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of the Obligations and (ii) in connection with (A) the syndication of the credit facilities provided for herein, (B) the preparation, negotiation, administration, management, execution and delivery of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (C) the enforcement or protection of their rights in connection with this Agreement or the Loan Documents or efforts to preserve, protect, collect, or enforce the Collateral, or (D) any workout, restructuring or negotiations in respect of any Obligations, (b) with respect to each L/C Issuer, and its Affiliates, all reasonable and documented in reasonable detail out-of-pocket expenses incurred in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, and (c) all reasonable
and documented in reasonable detail out-of-pocket expenses incurred by the Credit Parties who are not the Agents, the Arrangers, an L/C Issuer or any Affiliate of any of them, after the occurrence and during the continuance of an Event of Default, provided that such Credit Parties shall be entitled to reimbursement for no more than one counsel representing all such Credit Parties (absent a conflict of interest between the Credit Parties, where the affected Credit Parties inform the Borrower of such conflict, in which case the Credit Parties may engage and be reimbursed for one additional counsel).
Customer Credit Liabilities means at any time, the aggregate remaining value at such time of (a) outstanding gift certificates and gift cards sold by the Borrower and Subsidiary Guarantors entitling the holder thereof to use all or a portion of the certificate or gift card to pay all or a portion of the purchase price for any Inventory, and (b) outstanding merchandise credits issued by and customer deposits received by the Borrower and the Subsidiary Guarantors.
Customs Broker Agreement means an agreement, in form and substance reasonably satisfactory to the Collateral Agent, among the Borrower, the Subsidiary Guarantors, a customs broker or other carrier, and the Collateral Agent, in which the customs broker or other carrier acknowledges that it has control over and holds the documents evidencing ownership of the subject Inventory for the benefit of the Collateral Agent and agrees, upon notice from the Collateral Agent, to hold and dispose of the subject Inventory solely as directed by the Collateral Agent.
DDA means each checking or other demand deposit account maintained by any of the Loan Parties. All funds in each DDA shall be conclusively presumed to be Collateral and proceeds of Collateral and the Agents and the Lenders shall have no duty to inquire as to the source of the amounts on deposit in any DDA.
Debt Service Charges means for any Measurement Period, the sum of (a) Consolidated Interest Charges paid in cash or required to be paid in cash for such Measurement Period, plus (b) principal payments required to be made on account of Indebtedness (excluding (i) the Obligations, (ii) any Synthetic Lease Obligations and (iii) any principal payments required to be made with respect to the Term Facility solely as a result of any excess cash flow mandatory prepayment requirement under the Term Facility, but including, without limitation, any Capital Lease Obligations) for such Measurement Period, in each case determined in accordance with GAAP.
Debtor Relief Laws means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
Default means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.
Default Rate means (a) when used with respect to Obligations other than Letter of Credit Fees, an interest rate equal to (i) the Base Rate plus (ii) the Applicable Margin
applicable to Base Rate Loans, plus (iii) 2% per annum; provided, however, that with respect to a LIBO Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Loan plus 2% per annum, and (b) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Margin for LIBO Rate Loans plus 2% per annum.
Defaulting Lender means any Lender that (a) has failed, within one (1) Business Day of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or (iii) pay over to any Loan Party any other amount required to be paid by it hereunder; (b) has notified the Borrower or any Loan Party in writing, or has made a public statement, to the effect that it does not intend or expect to comply with any of its funding obligations under this Agreement or generally under other agreements in which it commits to extend credit; (c) has failed, within one (1) Business Day after request by the Administrative Agent or a Loan Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations to fund prospective Loans and participations in then outstanding Letters of Credit under this Agreement; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Loan Partys receipt of such certification in form and substance satisfactory to it and the Administrative Agent; or (d) has (or whose bank holding company has) been placed into receivership, conservatorship or bankruptcy; provided that a Lender shall not become a Defaulting Lender solely as a result of the acquisition or maintenance of an ownership interest in such Lender or Person controlling such Lender or the exercise of control over a Lender or Person controlling such Lender by a Governmental Authority or an instrumentality thereof so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender upon delivery of written notice of such determination to the Borrower, each L/C Issuer, the Swing Line Lender and each Lender.
Discharge of Term Obligations has the meaning specified in the Intercreditor Agreement.
Disposition or Dispose means the sale, transfer, license, lease, or other disposition (including any sale and leaseback transaction) of any property (including, without limitation, any Equity Interests or Disqualified Equity Interests of any other Person held by a specified Person) 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, in each case, resulting in consideration to such Person (including assumption of liabilities) for any such transaction or series of related transactions in excess of $1.0 million.
Disqualified Equity Interests means any Equity Interests of any Person that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event, (a)
matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, in each case prior to the six month anniversary of the Latest Maturity Date, (b) requires the payment of any cash dividend or any other scheduled payment constituting a return of capital, in each case prior to the six month anniversary of the Latest Maturity Date or (c) is convertible into or exchangeable for debt securities or for any Equity Interest referred to in clause (a) above, in each case at any time prior to the six month anniversary of the Latest Maturity Date.
Dollar and $ mean lawful money of the United States.
Domestic Subsidiary means any Subsidiary that is organized or existing under the laws of the United States, any state thereof or the District of Columbia.
Eligible Assignee means (a) a Credit Party or any of its Affiliates; (b) a bank, insurance company, or company engaged in the business of making commercial loans, which Person, together with its Affiliates, has a combined capital and surplus in excess of $250.0 million; (c) an Approved Fund; (d) any Person to whom a Credit Party assigns its rights and obligations under this Agreement as part of an assignment and transfer of such Credit Partys rights in and to a material portion of such Credit Partys portfolio of asset based credit facilities, and (e) any other Person (other than a natural person) approved by (i) the Administrative Agent and each L/C Issuer, and (ii) unless an Event of Default under Section 8.01(a) or 8.01(g) has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, Eligible Assignee shall not include a Loan Party or any of the Loan Parties Affiliates or Subsidiaries; and provided further that any proposed assignee that would be a Fee Recipient will not be an Eligible Assignee unless such Person is a Permitted Investor.
Eligible Credit Card Receivables means Accounts due to the Borrower and the Subsidiary Guarantors on a non-recourse basis from Visa, Mastercard, American Express Company, Discover, and other credit card issuer and processors acceptable to the Administrative Agent in its reasonable discretion, as arise in the ordinary course of business (net of fees payable to the applicable credit card issuer), which have been earned by performance, and are deemed by the Administrative Agent in its reasonable discretion to be eligible for inclusion in the calculation of the Borrowing Base. Without limiting the foregoing, none of the following shall be deemed to be Eligible Credit Card Receivables:
(a) Accounts due from major credit card processors that have been outstanding for more than five (5) Business Days from the date of sale;
(b) Accounts due from major credit card processors with respect to which the Borrower or a Subsidiary Guarantor does not have good, valid and marketable title, free and clear of any Lien (other than Liens granted to the Collateral Agent for its own benefit and the ratable benefit of the other Credit Parties and Liens to secure the Term Facility);
(c) Accounts due from major credit card processors that are not subject to a first priority security interest in favor of the Collateral Agent for its own benefit and the ratable benefit of the other Credit Parties (it being the intent that chargebacks in the
ordinary course by the credit card processors shall not be deemed violative of this clause);
(d) Accounts due from major credit card processors which are disputed, are with recourse, or with respect to which a claim, counterclaim, offset or chargeback has been asserted (to the extent of such claim, counterclaim, offset or chargeback);
(e) Accounts due from major credit card processors as to which the credit card processor has the right under certain circumstances to require the Borrower or a Subsidiary Guarantor to repurchase the Accounts from such credit card processor;
(f) Accounts due from any Person on account of any private label credit card receivables other than such Accounts under programs between a Loan Party and a third party reasonably acceptable to the Administrative Agent where the third party retains the consumer credit exposure;
(g) Accounts due from major credit card processors which the Administrative Agent determines in its reasonable discretion to be uncertain of collection, or
(h) Accounts not subject to Credit Card Notification, except Accounts with credit card processors set forth on Schedule 6.13 for a period of 90 days following the Closing Date (or such longer period as may be agreed by the Administrative Agent in its sole discretion).
Eligible In-Transit Inventory means, as of any date of determination thereof, without duplication of other Eligible Inventory, Inventory:
(a) Which is in transit from one U.S. location of the Borrower or a Subsidiary Guarantor to another U.S. location of the Borrower or a Subsidiary Guarantor and which otherwise would constitute Eligible Inventory; or
(b) (i) Which has been shipped by a Foreign Subsidiary or other Person from a foreign location for receipt by the Borrower or a Subsidiary Guarantor within forty-five (45) days of the date of shipment, which has left such foreign location in a water borne vessel or is in transit from such vessel on ground in the U.S. but has not yet been delivered to such Borrower or Subsidiary Guarantor;
(ii) For which the purchase order is in the name of the Borrower or a Subsidiary Guarantor and title has passed to such Borrower or Subsidiary Guarantor;
(iii) For which Collateral Agent has a first priority perfected security interest in such Inventory and all documents of title with respect to such Inventory by either of the following (A) the document of title names the Collateral Agent as consignee or alternatively (B) for Inventory shipped from a foreign location under a document of title, as to which the Collateral Agent has control over the documents of title which evidence ownership of the subject Inventory (such as by the delivery of a Customs Broker Agreement); provided, however, that in the
event of any change in law or judicial interpretation thereof the Collateral Agent reasonably believes that any additional actions are required by the Borrower or Subsidiary Guarantor in order to ensure that the Collateral Agent has a first priority, perfected security interest in such Inventory, the Borrower or such Subsidiary Guarantor shall be required to take such actions in order for such Inventory to satisfy this clause (b)(iii);
(iv) Which, at such time, (A) a UCC financing statement naming the Collateral Agent as secured party is on file in the appropriate UCC filing office and (B) is not subject to any Liens in favor of Persons other than the Collateral Agent (other than any Permitted Liens);
(v) Which is insured in accordance with the terms of this Agreement; and
(vi) Which otherwise would constitute Eligible Inventory;
provided, that at any time, Eligible In-Transit Inventory (other than Eligible In-Transit Inventory which is in transit from one location of the Borrower or a Subsidiary Guarantor to another location of the Borrower or a Subsidiary Guarantor) shall not exceed 15% (or during the period from October 1 through December 31 of any Fiscal Year, 30%) of Eligible Inventory at such time.
Eligible Inventory means, as of the date of determination thereof, without duplication, (a) Eligible In-Transit Inventory and (b) items of Inventory of the Borrower or a Subsidiary Guarantor that are finished goods, merchantable and readily saleable to the public in the ordinary course deemed by the Administrative Agent in its reasonable discretion to be eligible for inclusion in the calculation of the Borrowing Base, in each case that, except as otherwise agreed by the Administrative Agent, complies with each of the representations and warranties respecting Inventory made by the Borrower and the Subsidiary Guarantors in the Loan Documents, and that is not excluded as ineligible by virtue of one or more of the criteria set forth below. The following items of Inventory shall not be included in Eligible Inventory:
(a) Inventory that is not solely owned by the Borrower or a Subsidiary Guarantor;
(b) Inventory that is leased by or is on consignment to the Borrower or a Subsidiary Guarantor or as to which the Borrower or a Subsidiary Guarantor does not have good and valid title thereto;
(c) Inventory (other than Eligible In Transit Inventory or Inventory which is the subject of an Eligible Letter of Credit) that is not located (x) in the United States of America (excluding Puerto Rico and other territories or possessions of the United States) or (y) at a location that is owned or leased by the Borrower or a Subsidiary Guarantor, except, in the case of clause (y), to the extent that the Borrower or the Subsidiary Guarantors have furnished the Administrative Agent with (i) any UCC financing statements or other documents that the Administrative Agent may determine to be necessary to perfect its security interest in such Inventory at such location, and (ii) a
Collateral Access Agreement executed by the Person owning such location on terms reasonably acceptable to the Administrative Agent against the Eligible Inventory held at such location; provided, that in order for Inventory at a location to be deemed Eligible Inventory, Collateral Access Agreements are strictly required if such location is a distribution center or warehouse (excluding any warehouse or other storage facility utilized by a store location for storage of inventory after shipment from a distribution center if the Cost of Inventory at such warehouse or other storage facility is less than $1.0 million), and for locations other than distribution centers and warehouses, such a Collateral Access Agreement shall be so required only if the Cost of the Inventory at such location is greater than $1.0 million; provided, further, that, the Administrative Agent shall, in calculating Eligible Inventory, at any location a Collateral Access Agreement is not in place, make a rent reserve (in an amount reasonably determined by the Administrative Agent) against the Eligible Inventory held at such location if such location is in a Landlord Lien State (without regard to the Cost of Inventory at such location).
(d) Inventory that is comprised of goods which (i) are damaged, defective, seconds, or otherwise unmerchantable, (ii) are to be returned to the vendor, (iii) are obsolete or slow moving, or custom items, work-in-process, raw materials, or that constitute spare parts, promotional, marketing, packaging and shipping materials or supplies used or consumed in the Borrowers or a Subsidiary Guarantors business, (iv) are not in compliance with all standards imposed by any Governmental Authority having regulatory authority over such Inventory, its use or sale, (v) are vendor serviced merchandise not reflected in the stock ledger, or (vi) are bill and hold goods;
(e) Inventory that is not subject to a perfected first-priority security interest in favor of the Collateral Agent for its own benefit and the ratable benefit of the other Credit Parties;
(f) Inventory that consists of samples, labels, bags, packaging, and other similar non-merchandise categories;
(g) Inventory that is not insured in compliance with the provisions of Section 6.07 hereof;
(h) Inventory that has been sold but not yet delivered or as to which the Borrower or a Subsidiary Guarantor has accepted a deposit;
(i) Inventory that is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third party from which the Borrower or any of its Subsidiaries has received notice of a dispute in respect of any such agreement, which would materially interfere with the use of such license, patent, trademark, trade name or copyright by the Borrower or any of its Subsidiaries; or
(j) Inventory acquired in an acquisition permitted under Section 7.03, unless and until the Collateral Agent has completed or received (i) an appraisal of such Inventory from appraisers satisfactory to the Collateral Agent, establishes an inventory
advance rate and Inventory Reserves (if applicable) therefor, and otherwise agrees that such Inventory shall be deemed Eligible Inventory, and (ii) such other due diligence as the Agents may require, all of the results of the foregoing to be reasonably satisfactory to the Agents.
Eligible Letter of Credit means, as of any date of determination thereof, a Commercial Letter of Credit which supports the purchase of Inventory, (a) which Inventory does not constitute Eligible In-Transit Inventory and for which no documents of title have then been issued; (b) which Inventory otherwise would constitute Eligible Inventory, (c) which Commercial Letter of Credit has an expiry within forty-five (45) days of the date of determination, and (d) which Commercial Letter of Credit provides that it may be drawn only after the Inventory is completed and after documents of title have been issued for such Inventory reflecting the Borrower, a Subsidiary Guarantor, or the Collateral Agent as consignee of such Inventory.
Environmental Laws means any and all Federal, state, local and foreign statutes, laws, regulations, ordinances, rules, common law, judgments, orders, decrees, permits, concessions, grants, franchises or licenses, relating to pollution or the protection of the environment or the Release or threat of Release of any hazardous substances, materials or wastes (including Hazardous Materials) into the environment or human health (to the extent related to exposure to Hazardous Materials), or generation, storage, treatment, transport or handling of any Hazardous Materials.
Environmental Liability means any liability, whether pending or threatened (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower, any other Loan Party or any of their respective Restricted Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
Environmental Permit means any permit, approval, identification number, license or other authorization required under any Environmental Law.
Equity Interests means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.
Equity Investors means Holdings, the Sponsor and the Management Stockholders.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
ERISA Affiliate means any entity under common control with which Holdings or the Borrower would be treated as a single employer within the meaning of Section 414 of the Code.
ERISA Event means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by Holdings, the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) with respect to any Pension Plan, a failure to satisfy the minimum funding standard under Sections 412 and 430 of the Code or Sections 302 and 303 of ERISA, whether or not waived; (d) a determination that any Pension Plan is, or is expected to be, in at-risk status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code); (e) a complete or partial withdrawal (within the meanings of Sections 4203 and 4205 of ERISA) by Holdings, the Borrower or any ERISA Affiliate from a Multiemployer Plan or receipt by Holdings or the Borrower of notice from any Multiemployer Plan that it is insolvent or in reorganization (within the meanings of Sections 4241 and 4245 of ERISA) or in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 of ERISA); (f) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate under Section 4042 of ERISA a Pension Plan or Multiemployer Plan; (g) the appointment of a trustee to administer under Section 4042 of ERISA any Pension Plan or Multiemployer Plan; or (h) with respect to any Pension Plan the imposition of a lien or the posting of a bond or other security pursuant to Section 436(f) of the Code or Section 206(g)(5) of ERISA.
Event of Default has the meaning specified in Section 8.01. An Event of Default shall be deemed to be continuing unless and until that Event of Default has been duly waived as provided in Section 11.01.
Excess Availability means, as of any date of determination thereof by the Administrative Agent, the result, if a positive number, of:
(a) The lesser of:
(i) the Borrowing Base; or
(ii) the Aggregate Commitments; minus
(b) The aggregate of the outstanding Credit Extensions.
Excess Cash Flow means, for any Fiscal Year of Holdings, the sum (without duplication) of:
(a) the Consolidated Net Income (or loss) of Holdings and its Restricted Subsidiaries for such Fiscal Year, adjusted (i) to exclude any gains or losses attributable to any events as a result of which a mandatory prepayment (other than from Excess Cash Flow) of the Term Facility is required and (ii) to subtract the amount, if any, by which taxes paid or required to be paid in cash with respect to such Fiscal Year exceeds the amount of taxes deducted in calculating Consolidated Net Income and to add the amount, if any, by which taxes paid or required to be paid with respect to such Fiscal Year in cash are less than the amount deducted in calculating Consolidated Net Income; plus
(b) depreciation, amortization and other non-cash charges or losses deducted in determining such Consolidated Net Income (or loss) for such Fiscal Year; plus
(c) the amount, if any, by which Net Working Capital decreased during such Fiscal Year (except as a result of the reclassification of items from short-term to long-term or vice-versa); minus
(d) the amount, if any, by which Net Working Capital increased during such Fiscal Year (except as a result of the reclassification of items from short-term to long-term or vice-versa); minus
(e) cash expenditures of Holdings and its Restricted Subsidiaries for and incurred in connection with Permitted Acquisitions or Investments pursuant to Section 7.03(l) during such Fiscal Year (except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in Consolidated Net Income (or loss) for such Fiscal Year); minus
(f) permanent repayments of Indebtedness (including any premium, make-whole or other penalty associated therewith) made in cash by the Restricted Subsidiaries during such Fiscal Year and permitted hereunder, but only to the extent that the Indebtedness so prepaid by its terms cannot be reborrowed or redrawn and such prepayments do not occur in connection with a refinancing of all or any portion of such Indebtedness; minus
(g) 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; minus
(h) Restricted Payments made in cash by the Borrower during such Fiscal Year pursuant to Section 7.06(c) or (d); minus
(i) Capital Expenditures actually made in cash by Holdings and its Restricted Subsidiaries in such Fiscal Year (except to the extent financed with the proceeds of Indebtedness, equity issuances, casualty proceeds, condemnation proceeds or other proceeds that would not be included in Consolidated Net Income (or loss) for such Fiscal Year); minus
(j) any non-cash gains included in determining such Consolidated Net Income (or loss) for such Fiscal Year.
Excess Swing Line Loans has the meaning specified in Section 2.14(a).
Excluded Account means any (a) deposit account which is used solely for purposes of funding payroll, payroll taxes, employee benefit payments, (b) deposit accounts which are zero balance accounts, (c) other controlled disbursement accounts, (d) trust accounts, (e) petty cash accounts, (f) deposit accounts to the extent holding funds from unredeemed gift cards and (g) other deposit accounts with a demand deposit balance not exceeding $10,000 individually and $100,000 in the aggregate at any time.
Excluded Taxes means, with respect to the Agents, any Lender, each L/C Issuer or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), franchise taxes imposed on it (in lieu of net income taxes) and branch profits taxes (or similar taxes) imposed by a jurisdiction (or any political subdivision thereof) as a result of such recipient being organized or resident in, maintaining a Lending Office in, or doing business in such jurisdiction, (b) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 11.13), any U.S. federal withholding tax to the extent imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding tax pursuant to Section 3.01; (c) taxes attributable to a recipients failure to comply with Section 3.01(g) or (h) and (d) any U.S. federal withholding tax imposed as a result of such recipients failure to establish a complete exemption under FATCA.
Existing Class shall have the meaning provided in Section 2.16.
Existing Commitment shall have the meaning provided in Section 2.16.
Existing Credit Agreement means that certain Credit Agreement dated as of August 16, 2007 among the Borrower, the guarantors party thereto, the Administrative Agent, the lenders party thereto and the other agents party thereto, as amended.
Existing Letters of Credit shall have the meaning provided in Section 2.03(m).
Existing Loans shall have the meaning provided in Section 2.16.
Existing Term Loan Facility means that certain $125.0 million senior secured term loan agreement dated as of August 16, 2007 among the Borrower, the guarantors party thereto, the Administrative Agent, the lenders party thereto and the other agents party thereto, as amended.
Extended Commitments shall have the meaning provided in Section 2.16.
Extended Loans shall have the meaning provided in Section 2.16.
Extending Lender shall have the meaning provided in Section 2.16.
Extension Amendment shall have the meaning provided in Section 2.16.
Extension Date shall have the meaning provided in Section 2.16.
Extension Election shall have the meaning provided in Section 2.16.
Extension Request shall have the meaning provided in Section 2.16.
Extension Series shall mean all Extended Commitments that are established pursuant to the same Extension Amendment (or any subsequent Extension Amendment to the extent such Extension Amendment expressly provides that the Extended Commitments provided for therein are intended to be a part of any previously established Extension Series) and that provide for the same interest margins, extension fees, maturity and other terms.
Facility means the Commitments, Loans and other Credit Extensions under this Agreement.
FATCA means Sections 1471 through 1474 of the Code as in effect on the date hereof or any successor provision that is substantively comparable and not materially more onerous to comply with, and, in each case, any current or future regulations promulgated thereunder or official interpretations thereof.
Federal Funds Rate means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to JPMCB on such day on such transactions as determined by the Administrative Agent.
Fee Letter means, collectively (a) the letter agreement, dated March 21, 2012, among the Borrower, J.P. Morgan Securities LLC, JPMCB, Wells Fargo Bank, National Association and Wells Fargo Capital Finance, LLC, and (b) the letter agreement, dated March 21, 2012, between the Borrower and JPMCB, as such letter agreements may from time to time be amended.
Fee Recipient means any Person (other than the Administrative Agent in its capacity as such) that will be entitled to receive any payment of fees (however denominated), including, without limitation, any Commitment Fee or any Letter of Credit Fee.
First Priority means, with respect to any Lien purported to be created on any Collateral pursuant to any Collateral Document, that such Lien is the most senior Lien to which
such Collateral is subject (subject to (a) in the case of Mortgages, Permitted Encumbrances, and (b) otherwise, Permitted Liens).
Fiscal Month means any fiscal month of any Fiscal Year.
Fiscal Quarter means any fiscal quarter of any Fiscal Year.
Fiscal Year means any period of twelve consecutive months ending on the last Saturday of February in each calendar year (except for 53-week years).
Flood Documentation means, with respect to each Mortgaged Property located in the United States or any territory thereof, (i) a completed life-of-loan Federal Emergency Management Agency standard flood hazard determination (together with a notice about Special Flood Hazard Area status and flood disaster assistance duly executed by the Borrower and the applicable Loan Party relating thereto) and (ii) a copy of, or a certificate as to coverage under, and a declaration page relating to, the insurance policies required by Section 6.07 hereof and the applicable provisions of the Collateral Documents, each of which shall (A) be endorsed or otherwise amended to include a standard or New York lenders loss payable or mortgagee endorsement (as applicable), (B) name the Collateral Agent, on behalf of the Credit Parties, as additional insured and loss payee/mortgagee and (C) identify the address of each property located in a Special Flood Hazard Area, the applicable flood zone designation and the flood insurance coverage and deductible relating thereto and (iv) be otherwise in form and substance reasonably satisfactory to the Administrative Agent.
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 statue 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 Lender means any Lender or L/C Issuer that is not, for U.S. federal income tax purposes, (a) an individual who is a citizen or resident of the United States, (b) a corporation, partnership or other entity treated as a corporation or partnership created or organized in or under the laws of the United States, or any political subdivision thereof, (c) an estate whose income is subject to U.S. federal income taxation regardless of its source or (d) a trust if a court within the United States is able to exercise primary supervision over the administration of such trust and one or more United States persons have the authority to control all substantial decisions of such trust. In addition, solely for purposes of clause (b) of the definition of Excluded Taxes, a Foreign Lender shall include a partnership or other entity treated as a partnership created or organized in or under the laws of the United States, or any political subdivision thereof, but only to the extent the partners of such partnership (including indirect partners if the direct partners are partnerships or other entities treated as partnerships for U.S. federal income tax purposes created or organized in or under the laws of the United States, or any political subdivision thereof) are treated as Foreign Lenders under the preceding sentence.
Foreign Plan means any employee benefit plan, program, policy, arrangement or agreement maintained or contributed to by, or entered into with, Holdings, the Borrower or any Subsidiary with respect to employees employed by Holdings, the Borrower or any Subsidiary outside the United States that is not subject to the laws of the United States.
Foreign Subsidiary means any Subsidiary that is not a Domestic Subsidiary.
Former Lender means any Person that was a Lender but that has assigned all of its Loans and Commitments, and no longer holds any Loans and Commitments and, at the time of such assignment, was, or an Affiliate of such Lender was, a counterparty under any agreement with respect to Bank Products, or Cash Management Services with any Loan Party, which agreements relating to Bank Products, or Cash Management Services have not expired, been paid out or otherwise terminated or renewed.
FRB means the Board of Governors of the Federal Reserve System of the United States.
Fund means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
GAAP means generally accepted accounting principles in the United States, as in effect from time to time; provided, however, that if the Borrower notifies the Administrative Agent that the Borrower requests 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 provisions (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).
Guarantee means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another Person (the primary obligor) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other obligation of the
payment or performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other obligation of any other Person, whether or not such Indebtedness or other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount of any Guarantee shall be deemed to be an amount equal to, with respect to clause (a) above, 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 or, with respect to clause (b) above, the fair market value of the property subject to (or contemplated to be subject to) such Lien as determined by the guaranteeing Person in good faith. The term Guarantee as a verb has a corresponding meaning.
Guarantors means, collectively, Holdings, the Subsidiary Guarantors listed on Schedule 6.12 and each other Restricted Subsidiary of Holdings that is required to sign a counterpart to this Agreement pursuant to Section 6.12(a)(i).
Guaranty means the guaranty contained in Article X hereof made by the Guarantors in favor of the Credit Parties.
Hazardous Materials means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated or defined as hazardous or toxic (or words of similar import) pursuant to any Environmental Law.
Holdings has the meaning specified in the Preliminary Statements.
IFRS means International Financial Reporting Standards and applicable accounting requirements set by the International Accounting Standards Board or any successor thereto (or the Financial Accounting Standards Board, the Accounting Principles Board of the American Institute of Certified Public Accountants, or any successor to either such Board, or the SEC, as the case may be), as in effect from time to time.
Incremental Amount means, at any time, the excess, if any, of (a) $25.0 million over (b) the aggregate amount of all Incremental Commitments established prior to such time pursuant to Section 2.15.
Incremental Assumption Agreement means an Incremental Assumption Agreement among, and in form and substance reasonably satisfactory to, the Borrower, the Administrative Agent and one or more Incremental Lenders.
Incremental Commitment means the commitment of any Lender, established pursuant to Section 2.15, to increase (or establish, in the case of such a Lender that did not
previously have a Commitment) such Lenders Commitment. Other than as to the date of establishment thereof, the Incremental Commitments shall be on the same terms as the Commitments and upon establishment shall become part of the Commitments.
Incremental Lender means a Lender with an Incremental Commitment.
Incremental Loans means Loans made by one or more Incremental Lenders to the Borrower pursuant to Section 2.15.
Indebtedness means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:
(a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;
(b) the maximum amount (after giving effect to any prior drawings or reductions that may have been reimbursed) of all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial letters of credit), bankers acceptances, bank guaranties, surety bonds and similar instruments;
(c) net obligations of such Person under Swap Contracts;
(d) all obligations of such Person to pay the deferred purchase price of property or services (other than trade accounts payable in the ordinary course of business which are being disputed in good faith by appropriate proceedings or which are not past due for more than 120 days after the date on which such trade account was created, any bona fide earn-out obligation or purchase price adjustment until such obligation is not paid after becoming due and payable and accounts for payroll and other liabilities in the ordinary course of business);
(e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;
(f) all Attributable Indebtedness in respect of Capital Lease Obligations and Synthetic Lease Obligations of such Person and all Synthetic Debt of such Person;
(g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and
(h) all Guarantees of such Person in respect of any of the foregoing.
For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is non-recourse to such Person. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of outstanding Indebtedness as of any date shall be the principal amount or accreted value thereof at such date.
Indemnified Taxes means 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.
Indemnitee has the meaning specified in Section 11.04(b).
Independent Financial Advisor means an accounting, appraisal, investment banking firm or consultant of nationally recognized standing that is, in the good faith judgment of the Borrower, qualified to perform the task for which it has been engaged and that is independent of the Borrower and its Affiliates.
Information has the meaning specified in Section 11.07.
Information Memorandum means the Confidential Offering Memorandum dated March 2012 used by the Arrangers in connection with the syndication of the Commitments.
Initial Maturity Date means April 6, 2017.
Intellectual Property means all present and future: trade secrets, know-how and other proprietary information; trademarks, internet domain names, service marks, trade dress, trade names, business names, designs, logos, slogans, indicia of origin, and other source and/or business identifiers, and all registrations which have heretofore been or may hereafter be issued thereon throughout the world; copyrights and copyright applications; unpatented inventions (whether or not patentable); patents and patent applications; license agreements related to any of the foregoing; all other intellectual property; and all common law and other rights throughout the world in and to all of the foregoing.
Intellectual Property Security Agreement means the Intellectual Property Security Agreement dated as of April 6, 2012, between the Borrower and the Collateral Agent, together with each other intellectual property security agreement and intellectual property security agreement supplement delivered pursuant to Section 6.12, in each case as amended.
Intercreditor Agreement means an intercreditor agreement substantially in the form of Exhibit C.
Interest Payment Date means (a) as to any LIBO Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date; provided, however, that if any Interest Period for a LIBO Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and
(b) as to any Base Rate Loan (including a Swing Line Loan), the first Business Day after the end of each calendar quarter and the Maturity Date.
Interest Period means, as to each LIBO Rate Loan, the period commencing on the date such LIBO Rate Loan is disbursed or converted to or continued as a LIBO Rate Loan and ending on the date one, two, three or six months thereafter (or such other period as agreed by the Borrower and all applicable Lenders), as selected by the Borrower in its Committed Loan Notice or Conversion/Continuation Notice, as the case may be; 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 next preceding Business Day;
(b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period shall extend beyond the Maturity Date.
Inventory has the meaning given that term in the UCC, and shall also include, without limitation, all: (a) goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) goods of said description in transit; (c) goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.
Inventory Component means (a) Eligible Inventory, net of Inventory Reserves, valued at cost, multiplied by (b) the Appraised Value Percentage, multiplied by 90%.
Inventory Reserves means such reserves as may be established from time to time by the Administrative Agent in the Administrative Agents reasonable discretion (exercised in a manner consistent with the Administrative Agents practices with respect to other similarly situated customers of the Administrative Agent) which negatively affect the saleability, at retail, of the Eligible Inventory or which reflect such other factors as negatively affect the market value of the Eligible Inventory. Without limiting the generality of the foregoing, Inventory Reserves may include (but are not limited to) reserves based on:
(a) Obsolescence;
(b) Seasonality;
(c) Shrink;
(d) Freight and duties related to Eligible In-Transit Inventory;
(e) Change in Inventory character;
(f) Change in Inventory composition;
(g) Change in Inventory mix;
(h) Markdowns (both permanent and point of sale);
(i) Retail markdowns and markups inconsistent with prior period practice and performance, industry standards, current business plans or advertising calendar and planned advertising events; and
(j) Out-of-date and/or expired Inventory.
Investment means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or interest in, another Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the assets of another Person or of the assets of another Person that constitute a discrete business unit. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested (measured at the time made), without adjustment for subsequent increases or decreases in the value of such Investment.
IRS means the United States Internal Revenue Service.
ISP means, with respect to any Letter of Credit, the International Standby Practices 1998 published by the Institute of International Banking Law & Practice (or such later version thereof as may be in effect at the time of issuance).
Issuer Documents means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by any L/C Issuer and the Borrower (or any Subsidiary Guarantor) or in favor of such L/C Issuer and relating to any such Letter of Credit.
JPMCB has the meaning specified in the introductory paragraph hereto.
Landlord Lien State means such state(s) in which a landlords claim for rent has priority over the lien of the Collateral Agent in any of the Collateral (including, without limitation, Virginia, Pennsylvania, and Washington).
Latest Maturity Date shall mean at any date of determination, the latest Maturity Date applicable to any Class of Commitments or Loans that is outstanding hereunder on such date of determination, as extended in accordance with this Agreement from time to time.
Laws means, collectively, all international, foreign, Federal, state and local statutes, laws (including common law), treaties, rules, guidelines, regulations, judgments, ordinances, codes and administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.
L/C Advance means, with respect to each Lender, such Lenders funding of its participation in any L/C Borrowing in accordance with its Applicable Percentage.
L/C Borrowing means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Committed Borrowing.
L/C Credit Extension means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.
L/C Issuer means JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, and any other Lenders selected by the Borrower and approved by the Administrative Agent in its reasonable discretion. Any L/C Issuer may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such L/C Issuer, in which case the term L/C Issuer shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.
L/C Obligations means, as at any date of determination, the aggregate undrawn amount available to be drawn under all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For purposes of computing the amounts available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.06. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be outstanding in the amount so remaining available to be drawn.
Lease means any agreement, whether written or oral, no matter how styled or structured, pursuant to which a Loan Party is entitled to the use or occupancy of any space in a structure, land, improvements or premises for any period of time.
Lender has the meaning specified in the introductory paragraph hereto and, as the context requires, includes the Swing Line 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.
Letter of Credit means any letter of credit issued hereunder.
Letter of Credit Application means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by any L/C Issuer.
Letter of Credit Expiration Date means the day that is five days prior to the Initial Maturity Date or, if such day is not a Business Day, the next preceding Business Day; provided that the Letter of Credit Expiration Date may be extended pursuant to an Extension Amendment in accordance with Section 2.16.
Letter of Credit Fee has the meaning specified in Section 2.03(i).
Letter of Credit Sublimit means an amount equal to $20.0 million. The Letter of Credit Sublimit is part of, and not in addition to, the Aggregate Commitments. A permanent reduction of the Aggregate Commitments shall not require a corresponding pro rata reduction in the Letter of Credit Sublimit; provided, however, that if the Aggregate Commitments are reduced to an amount less than the Letter of Credit Sublimit, then the Letter of Credit Sublimit shall be reduced to an amount equal to (or, at Borrowers option, less than) the Aggregate Commitments.
LIBO Rate means for any Interest Period with respect to a LIBO Rate Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (BBA LIBOR), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the LIBO Rate for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBO Rate Loan being made, continued or converted by JPMCB and with a term equivalent to such Interest Period would be offered by JPMCBs London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.
LIBO Rate Loan means a Committed Loan that bears interest at a rate based on the LIBO Rate.
Lien means any mortgage, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), charge, preference, or priority in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to Real Estate, and any financing lease having substantially the same economic effect as any of the foregoing).
Liquidation means the exercise by the Administrative Agent or Collateral Agent of those rights and remedies accorded to such Agents under the Loan Documents and applicable Law as a creditor of the Loan Parties with respect to the realization on the Collateral, including (after the occurrence and continuation of an Event of Default) the conduct by the Loan Parties acting with the consent of the Administrative Agent, of any public, private or going out of business sale or other disposition of the Collateral for the purpose of liquidating the Collateral. Derivations of the word Liquidation (such as Liquidate) are used with like meaning in this Agreement.
Liquidity Event means that Excess Availability is less than $10.0 million for three (3) consecutive Business Days.
Loan means an extension of credit by a Lender to the Borrower under Article II in the form of a Committed Loan (including any Extended Loan) or any Swing Line Loan.
Loan Account has the meaning assigned to such term in Section 2.11(a).
Loan Documents means, collectively, (a) this Agreement, (b) the Notes, (c) the Collateral Documents, (d) the Fee Letter, (e) any Extension Amendment and (f) any agreement entered into after the Closing Date between or among the Borrower, the Administrative Agent and/or any other Credit Party or any of their Affiliates in connection with this Agreement or any transactions contemplated hereby which, in the case of this clause (f), is specified by its terms as a Loan Document hereunder.
Loan Parties means, collectively, the Borrower and each Guarantor.
Management Agreement means the Amended and Restated Management Services Agreement dated as of September 1, 2011 between Leonard Green & Partners, L.P. (or any Affiliate of Leonard Green & Partners, L.P. to which such agreement has been assigned) and the Borrower as in effect as of the Closing Date or as amended in any manner not materially adverse to the Lenders.
Management Fees means all fees and expense reimbursements payable to Leonard Green & Partners, L.P. or any of its controlled Affiliates pursuant to the Management Agreement.
Management Stockholders means the members of management of Holdings or any of its Subsidiaries who are investors in Holdings or any direct or indirect parent thereof on the Closing Date.
Material Adverse Effect means (a) any change, circumstance, event or effect that would be materially adverse to the assets, liabilities, business, financial condition or results of operations of Holdings and its Restricted Subsidiaries taken as a whole; (b) a material impairment of the rights and remedies of the Administrative Agent, the Collateral Agent or any Lender under any Loan Document, or of the ability of any of Holdings, the Borrower or any Material Subsidiary to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any of Holdings, the Borrower or any Material Subsidiary of any Loan Document to which it is a party.
Material Indebtedness means Indebtedness (other than the Obligations) of any of Holdings or any of its Restricted Subsidiaries in an aggregate principal amount exceeding $10.0 million for all such Persons. For purposes of determining the amount of Material Indebtedness at any time, the amount of the obligations in respect of any Swap Contract at such time shall be calculated at the Swap Termination Value thereof.
Material Subsidiary means, at any date of determination, any Restricted Subsidiary or group of Restricted Subsidiaries (a) whose total assets at the last day of the most recently ended Measurement Period were equal to or greater than 5% of the Consolidated total assets of Holdings and its Consolidated Subsidiaries at such date, or (b) whose gross revenues for such Measurement Period were equal to or greater than 5% of the Consolidated gross revenues of Holdings and its Consolidated Subsidiaries for such period, in each case determined in accordance with GAAP.
Maturity Date means, as to the applicable Loan (other than Swing Line Loans), the Initial Maturity Date or any maturity date related to any Extension Series of Extended Commitments and, as to any Swing Line Loan, the Swing Line Maturity Date.
Maximum Rate has the meaning specified in Section 11.09.
Measurement Period means, at any date of determination, the most recently completed four consecutive Fiscal Quarters of Holdings and its Restricted Subsidiaries for which financial statements pursuant to Section 6.01(a) or (b) have been, or were required to have been, delivered for the applicable fiscal period (or, in the case of any calculation made prior to the first such delivery, the four Fiscal Quarter period ended November 16, 2011).
Mezzanine Facility means $150.0 million in mezzanine notes and any payment in kind notes issued pursuant to that certain Securities Purchase Agreement, dated as of the August 16, 2007, among the Loan Parties and the purchasers named therein.
Monthly Financial Statement Delivery Period means each period commencing on any day on which Excess Availability is less than $25.0 million and ending on the first day thereafter that follows 60 consecutive days on which Excess Availability was greater than or equal to $25.0 million.
Moodys means Moodys Investors Service, Inc. and any successor thereto.
Mortgage means any deed of trust, trust deed, deed to secure debt, mortgage or other similar instrument, as applicable, creating a real property Lien on and security interest in Real Estate in favor of Collateral Agent on behalf of the Credit Parties, in each case in form and substance reasonably satisfactory to the Administrative Agent and its counsel.
Mortgage Policy has the meaning specified in Section 6.12(b).
Mortgaged Property means each parcel of Real Estate owned in fee by any Loan Party, if any, which shall be subject to a Mortgage pursuant to Section 6.12.
Multiemployer Plan means a multiemployer plan as defined in Section 4001(a)(3) of ERISA, to which Holdings, the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions on behalf of participants who are or were employed by any of them.
Net Cash Proceeds means with respect to any Disposition by the Borrower or any of its Restricted Subsidiaries, the excess, if any, of (a) the sum of cash and Cash Equivalents received in connection with such transaction (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) over (b) the sum of (i) the principal amount of any Indebtedness (plus any premium or other required payment on account thereof) that is secured by a Lien having priority over the Lien of the Collateral Agent (if any) on the applicable asset and that is required to be repaid in connection with such transaction (other than Indebtedness under the Loan Documents, but including, the payment of the proceeds from any Term Priority Collateral in reduction of the Indebtedness under the Term Facility) and (ii) the reasonable out-of-pocket expenses incurred by Borrower or such Restricted Subsidiary in connection with such transaction.
Net Working Capital means, at any date, (a) the Consolidated current assets of Holdings and its Restricted Subsidiaries as of such date (excluding cash and current assets in respect of income taxes) minus (b) the Consolidated current liabilities of Holdings and its Restricted Subsidiaries as of such date (excluding current liabilities in respect of Indebtedness and deferred income taxes). Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.
Notes means the promissory notes of the Borrower substantially in the form of Exhibit E, each payable to a Lender, evidencing the Loans made by the Lenders, as each may be amended, supplemented or modified from time to time.
NPL means the National Priorities List under CERCLA.
Obligations means (a) all debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, and (b) any Other Liabilities.
Organization Documents means (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, limited 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.
Other Liabilities means amounts due on account of or arising from (a) any Cash Management Services furnished to any of the Loan Parties and (b) any transaction which arises out of any Bank Product entered into with any of the Loan Parties, as each may be amended from time to time.
Other Taxes means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including any interest, additions to tax or penalties applicable thereto) arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
Outstanding Amount means (a) with respect to Committed Loans and Swing Line Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of Committed Loans and Swing Line Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by the Borrower of Unreimbursed Amounts.
Overadvance means a Credit Extension to the extent that, immediately after its having been made, Excess Availability is less than zero.
Participant has the meaning specified in Section 11.06(d).
Participant Register has the meaning specified in Section 11.06(d).
PBGC means the Pension Benefit Guaranty Corporation.
PCAOB means the Public Company Accounting Oversight Board.
Pension Plan, means any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Section 412 of the Code or Title IV of ERISA and is sponsored or maintained by Holdings, the Borrower or any ERISA Affiliate or to which Holdings, the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years on behalf of participants who are or were employed by any of them.
Perfection Certificate means a certificate in the form of Exhibit H-1 or any other form approved by the Collateral Agent, as the same shall be supplemented from time to time by a Perfection Certificate Supplement or otherwise.
Perfection Certificate Supplement means a certificate supplement in the form of Exhibit H-2 or any other form approved by the Collateral Agent.
Permitted Acquisition has the meaning assigned to such term in Section 7.03(h).
Permitted Encumbrances has the meaning specified in the Mortgages.
Permitted Holdco Debt means Indebtedness of Holdings that (a) is not subject to any Guarantee by the Borrower or any other Restricted Subsidiary, (b) will not mature prior to the date that is 180 days after the Latest Maturity Date, (c) has no scheduled amortization or mandatory redemption of principal (excluding customary offers to purchase under certain circumstances, such as a change in control) prior to the date that is 180 days after the Latest Maturity Date, (d) does not require or permit payments in cash of interest or other amounts in the nature of interest prior to the date that is 180 days after the Latest Maturity Date, (e) is subordinated to the Obligations on terms reasonably acceptable to the Administrative Agent, (f) is unsecured, (g) is not convertible into or exchangeable for any Indebtedness or Equity Interests other than Equity Interests in Holdings (other than Disqualified Equity Interests) on market terms, (h) has covenants, defaults and remedies provisions customary for senior discount notes of an issuer that is the parent of a borrower under senior credit facilities, and (i) the net proceeds from which are contributed by Holdings to the Borrower or any of the Restricted Subsidiaries for its general corporate purposes (including, without limitation, for the payment of the purchase price for acquisitions permitted under Section 7.03(h)).
Permitted Indebtedness has the meaning specified in Section 7.02.
Permitted Investor means any Fee Recipient that, with respect to all payments of fees (however denominated) to be paid under this Agreement or any other Loan Document, is entitled to a complete exemption from United States Federal withholding tax at the time such Person becomes a party to this Agreement (and absent a subsequent change in law, at all times thereafter); provided that any Person claiming an exemption with respect to fees pursuant to Internal Revenue Service Form W-8BEN (directly or indirectly through W-8IMY) will not be a Permitted Investor unless such exemption is based on the business profits or other income articles of a tax treaty to which the United States is a party; and provided further that a Person shall not be a Permitted Investor unless it provides the Borrower and the Administrative Agent with one or more executed original copies (as requested by the Borrower or the Administrative Agent) of Internal Revenue Service Form W-9 (or its successor form) or the applicable Internal Revenue Service Form W-8 (or its successor form) no later than the date such Person becomes a party.
Permitted Lien has the meaning specified in Section 7.01.
Permitted Overadvance means an Overadvance made by the Administrative Agent, in its discretion, which:
(a) Is made to maintain, protect or preserve the Collateral and/or the Credit Parties rights under the Loan Documents or which is otherwise for the benefit of the Credit Parties; or
(b) Is made to enhance the likelihood of, or to maximize the amount of, repayment of any Obligation;
(c) Is made to pay any other amount chargeable to any Loan Party hereunder; and
(d) Together with all other Permitted Overadvances then outstanding, shall not (i) exceed five percent (5%) of the Borrowing Base in the aggregate outstanding at any time or (ii) unless a Liquidation is taking place, remain outstanding for more than forty-five (45) consecutive Business Days, or (iii) be made on more than two occasions in any 180 day period;
provided, however, that the foregoing shall not (i) modify or abrogate any of the provisions of Section 2.03 regarding the Lenders obligations with respect to L/C Obligations, or (ii) result in any claim or liability against the Administrative Agent (regardless of the amount of any Overadvance) for inadvertent Overadvances (i.e., where an Overadvance results from changed circumstances beyond the control of the Administrative Agent (such as a reduction in the collateral value)), and such inadvertent Overadvances shall not reduce the amount of Permitted Overadvances allowed hereunder, and provided further that in no event shall the Administrative Agent make an Overadvance, if after giving effect thereto, the principal amount of the Credit Extensions would exceed the Aggregate Commitments (as in effect prior to any termination of the Commitments pursuant to Section 2.06, hereof).
Permitted Protest means the protest by the Borrower or any Restricted Subsidiary of any Lien (other than any such Lien that secures the Obligations), taxes, or rental payment, provided that (a) a reserve with respect to such obligation is established on the books and records of the applicable Person in such amount (if any) to the extent required under GAAP, (b) any such protest is prosecuted diligently by the Borrower or such Restricted Subsidiary, as the case may be, in good faith, by appropriate proceedings, (c) such protest effectively suspends collection of the contested obligation and enforcement of any Lien securing such obligation, and (d) the failure to make payment during the pendency of such protest, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.
Permitted Refinancing Indebtedness means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person (or any successor of such Person) by such Person or its successor; provided, that (a) the principal or committed amount (or accreted value, if applicable) thereof does not exceed the sum of (i) the outstanding principal or committed amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended plus (ii) prepayment premiums and other reasonable amounts paid, and fees (including original issue discount and upfront fees) and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension, (b) other than with regard to Permitted Refinancing Indebtedness in respect of Indebtedness permitted pursuant to Section 7.02(e) or Section 7.02(g), such modification, refinancing, refunding, renewal or extension has (i) a final maturity date equal to or later than the final maturity date of the Indebtedness being modified, refinanced, refunded, renewed or extended and (ii) a weighted average life to maturity equal to or greater than the weighted average life to maturity of the Indebtedness being modified, refinanced, refunded, renewed or extended, (c) if the Indebtedness being modified, refinanced, refunded, renewed or extended is Subordinated Indebtedness, such modification, refinancing, refunding, renewal or extension (i) is subordinated in right of payment to the Obligations on terms at least as favorable, taken as a
whole, to the Lenders as those contained in the documentation governing the Subordinated Indebtedness being modified, refinanced, refunded, renewed or extended, (ii) does not require payments of cash interest prior to the date that is six months following the maturity date of the Indebtedness being refinanced in amounts greater than was required by the Indebtedness being refinanced, and (iii) contains covenants and events of default that are not more restrictive taken as a whole than the covenants and events of default contained in the documentation governing the Indebtedness being refinanced (as determined in good faith by the Borrower), and (d) no property of any Loan Party or Restricted Subsidiary shall constitute collateral security for the Indebtedness so modified, refinanced, refunded, renewed, or extended other than any Permitted Liens.
Person means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, limited partnership, Governmental Authority or other entity.
Plan means any employee benefit plan (as such term is defined in Section 3(3) of ERISA) established or maintained by Holdings, the Borrower or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate.
Platform has the meaning specified in Section 6.02.
Pledge Agreement means the Pledge Agreement dated April 6, 2012, among the Loan Parties and the Collateral Agent, together with each other pledge agreement and pledge agreement supplement delivered pursuant to Section 6.12(a)(ii), as amended.
Pledged Debt means any debt instrument constituting Collateral under any of the Collateral Documents.
Pledged Equity means any certificated equity security constituting Collateral under any of the Collateral Documents.
Prime Rate means the rate of interest per annum publicly announced from time to time by JPMCB as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.
Pro Forma Basis means, with respect to compliance with any test or covenant or calculation hereunder, the determination or calculation of such test, covenant or ratio (including in connection with Specified Transactions) in accordance with Section 1.09.
Public Lender has the meaning specified in Section 6.02.
Public Market shall exist if (a) a Public Offering has been consummated and (b) any Equity Interests of Holdings have been distributed by means of an effective registration statement under the Securities Act.
Public Offering means a public offering of the Equity Interests of Holdings pursuant to an effective registration statement under the Securities Act.
Real Estate means all Leases and all land, together with the buildings, structures, parking areas, and other improvements thereon, now or hereafter owned by any Loan Party.
Register has the meaning specified in Section 11.06(c).
Registered Public Accounting Firm has the meaning specified by the Securities Laws and shall be independent of Holdings and its Subsidiaries as prescribed by the Securities Laws.
Related Parties means, with respect to any Person, such Persons Affiliates and the partners, directors, officers, employees, agents and advisors of such Person and of such Persons Affiliates.
Release means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating of any Hazardous Material into or through the environment.
Reportable Event means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived by regulation.
Reports has the meaning provided in Section 9.12(b).
Request for Credit Extension means (a) with respect to a Borrowing of Committed Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.
Required Lenders means, as of any date of determination, (a) if there are less than three Lenders at such time, all Lenders, and (b) if there are three or more Lenders at such time, (i) Lenders holding more than 50% of the Aggregate Commitments or, (ii) if the Aggregate Commitments of the Lenders to make Loans and the obligation of each L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 50% of the Total Outstandings (with the aggregate amount of each Lenders risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed held by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.
Reserves means all (if any) Inventory Reserves and Availability Reserves.
Responsible Officer means the chief executive officer, president, chief financial officer, any executive or senior vice president, treasurer, assistant treasurer or controller of a Loan Party or any of the other officers designated in writing to the Administrative Agent by an existing Responsible Officer of a Loan Party as an authorized signatory of any certificate or
other document to be delivered hereunder. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
Restricted Payment means any dividend or other distribution (whether in cash, securities or other property) by the Borrower or any of its Restricted Subsidiaries with respect to any Equity Interest of Holdings or any of its Restricted Subsidiaries, or any payment by the Borrower or any of its Restricted Subsidiaries (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 Holdings or any of its Restricted Subsidiaries direct or indirect stockholders, partners or members (or the equivalent of any thereof). For the avoidance of doubt, payments made pursuant to the Management Agreement shall not be considered Restricted Payments.
Restricted Subsidiary means any Subsidiary of Holdings other than an Unrestricted Subsidiary. In all events, the Borrower shall be deemed a Restricted Subsidiary of Holdings. A Restricted Subsidiary of Holdings that is also a Subsidiary of the Borrower shall also be deemed to be a Restricted Subsidiary of the Borrower.
S&P means Standard & Poors Ratings Services, a division of The McGrawHill Companies, Inc., and any successor thereto.
SEC means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.
Second Priority means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is second in priority only to the Liens created under the Term Loan Documents (subject to (a) in the case of Mortgages, Permitted Encumbrances) and (b) otherwise, Permitted Liens).
Section 2.16 Additional Amendment shall have the meaning provided in Section 2.16(c).
Securities Act means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
Securities Laws means the Securities Act, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act of 2002 (in each case, as amended), and the applicable accounting and auditing principles, rules, standards and practices promulgated, approved or incorporated by the SEC or the PCAOB.
Security Agreement means the Security Agreement dated April 6, 2012, among the Loan Parties and the Collateral Agent, together with each other security agreement and security agreement supplement delivered pursuant to Section 6.12(a)(ii), as amended.
Settlement Date has the meaning specified in Section 2.14(a).
Shrink means Inventory which has been lost, misplaced, stolen, or is otherwise unaccounted for.
Solvent and Solvency mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Persons ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Persons property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.
Specified Equity Contribution means cash contributions in exchange for common equity of Holdings (or if preferred equity of Holdings, on terms and conditions reasonably acceptable to the Administrative Agent) or a cash capital contribution to Holdings and in each case promptly contributed to the Borrower by Holdings after the Closing Date and on or prior to the day that is ten days after the day on which financial statements are required to be delivered under Section 6.01(b) (without regard to any cure periods set forth in Section 8.01) for a month which is also a Fiscal Quarter end, which equity contribution shall be added to Consolidated EBITDA for the purposes of calculating compliance with the provisions of Section 7.15 in accordance with the definition of the term Consolidated Fixed Charge Coverage Ratio; provided that (a) in each four Fiscal Quarter period there shall be a period of at least two Fiscal Quarters in which no Specified Equity Contribution is made, (b) there shall be no more than four Specified Equity Contributions in the aggregate, (c) the amount of any Specified Equity Contribution shall be no greater than the amount required to cause the Borrower to be in compliance with the financial covenant set forth in Section 7.15, (d) to the extent that that amount of any Specified Equity Contribution is used to repay Indebtedness, such Indebtedness shall not be deemed to have been repaid for purposes of calculating the Consolidated Fixed Charge Coverage Ratio for the period with respect to which such Specified Equity Contribution is made, and (e) all Specified Equity Contributions shall be disregarded for all other purposes of this Agreement.
Specified Existing Commitment shall mean any Existing Commitments belonging to a Specified Existing Commitment Class.
Specified Existing Commitment Class shall have the meaning provided in Section 2.16(a).
Specified Transaction means any Investment that results in a Person becoming a Restricted Subsidiary, any designation of a Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary, any Disposition that results in a Restricted Subsidiary ceasing to be a Subsidiary of the Borrower, any Investment constituting an acquisition of assets constituting a
business unit, line of business or division of another Person or a Store or any Disposition of a business unit, line of business or division of the Borrower or a Restricted Subsidiary, in each case whether by merger, consolidation, amalgamation or otherwise, any incurrence or repayment of Indebtedness (other than Indebtedness incurred or repaid hereunder), any Restricted Payment or Incremental Term Loan and any other transaction that by the terms of this Agreement requires compliance with any financial ratio test to be calculated on a Pro Forma Basis. Notwithstanding anything herein to the contrary, in no event shall the acquisition of TCS Installation Services, LLC be deemed to be a Specified Transaction.
Sponsor means Leonard Green & Partners, L.P., a Delaware limited partnership.
Standby Letter of Credit means any Letter of Credit that is not a Commercial Letter of Credit and that (a) is used in lieu or in support of performance guaranties or performance, surety or similar bonds (excluding appeal bonds) arising in the ordinary course of business, (b) is used in lieu or in support of stay or appeal bonds, (c) supports the payment of insurance premiums for reasonably necessary casualty insurance carried by any of the Loan Parties, (d) supports payment or performance for identified purchases or exchanges of products or services in the ordinary course of business or (e) is used for such other purpose as may be approved by Administrative Agent.
Stated Amount means at any time the maximum amount for which a Letter of Credit may be honored.
Store means any retail store (which includes any real property, fixtures, equipment, inventory and other property related thereto) operated, or to be operated, by the Borrower or any Restricted Subsidiary.
Subordinated Indebtedness means all Indebtedness of a Loan Party that is subordinate in right of payment to any or all of the Obligations pursuant to subordination provisions reasonably acceptable to the Administrative Agent and which provide, without limitation, (a) for a maturity after the Latest Maturity Date, (b) that such Indebtedness is unsecured, (c) that no principal payments shall be required to be made until after the Latest Maturity Date, and (d) that interest shall accrue and be payable in cash at a market rate of interest, subject to the right of the Administrative Agent to impose a payment blockage period upon the occurrence and during the continuance of any Event of Default. In no event shall Disqualified Equity Interests be deemed Subordinated Indebtedness.
Subsidiary of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a Subsidiary or to Subsidiaries shall refer to a Subsidiary or Subsidiaries of Holdings.
Subsidiary Guarantors means collectively, all Restricted Subsidiaries of the Borrower other than (i) any CFC, (ii) any Subsidiary owned directly or indirectly by a CFC or (iii) any Domestic Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of the assets of such Domestic Subsidiary consist of Equity Interests in one or more Foreign Subsidiaries.
Supermajority Lenders means, as of any date of determination, (a) if there are less than three Lenders at such time, all Lenders, and (b) if there are three or more Lenders at such time, (i) Lenders holding more than 75% of the Aggregate Commitments or, (ii) if the Commitments of the Lenders to make Loans and the obligation of each L/C Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02, Lenders holding in the aggregate more than 75% of the Total Outstandings (with the aggregate amount of each Lenders risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed held by such Lender for purposes of this definition); provided that the Commitment of, and the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Supermajority Lenders.
Survey means a survey of any Mortgaged Property (and all improvements thereon) which is (a) (i) prepared by a surveyor or engineer licensed to perform surveys in the jurisdiction where such Mortgaged Property is located, (ii) dated (or redated) not earlier than six months prior to the date of delivery thereof unless there shall have occurred within six months prior to such date of delivery any exterior construction on the site of such Mortgaged Property or any easement, right of way or other interest in the Mortgaged Property has been granted or become effective through operation of law or otherwise with respect to such Mortgaged Property which, in either case, can be depicted on a survey, in which events, as applicable, such survey shall be dated (or redated) after the completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than 20 days prior to such date of delivery, or after the grant or effectiveness of any such easement, right of way or other interest in the Mortgaged Property, provided that with respect to any of the Mortgaged Properties described on Schedule 5.08(c) where no new construction has occurred since the most recent survey and no new encumbrances have been created since the date of such survey, a survey affidavit of no change shall satisfy the provisions of this clause (ii), (iii) certified by the surveyor (in a manner reasonably acceptable to the Administrative Agent) to the Administrative Agent, the Collateral Agent and the Title Company, (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such requirements are in effect on the date of preparation of such survey, and (v) sufficient for the Title Company to remove all standard survey exceptions from the title insurance policy (or commitment) relating to such Mortgaged Property and issue the endorsements of the type required by Section 6.12, or (b) otherwise acceptable to the Collateral Agent.
Swap Contract means any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any
combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement.
Swap Termination Value means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).
Swedish Credit Facility means the Revolving Credit and Term Loan Facility Agreement, dated April 27, 2009, between Elfa International AB and Swedbank AB, including any related notes, guarantees and collateral documents executed in connection therewith, and in each case as amended, restated, modified, refinanced, renewed, refunded, restructured or replaced in any manner.
Swedish Pledge Agreement means the Share Pledge Agreement, dated April 6, 2012, between the Borrower, as pledgor, and the Collateral Agent.
Swing Line means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.
Swing Line Borrowing means a borrowing of a Swing Line Loan pursuant to Section 2.04.
Swing Line Lender means JPMCB in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.
Swing Line Loan has the meaning specified in Section 2.04(a).
Swing Line Loan Notice means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.
Swing Line Maturity Date means the Initial Maturity Date, as such date may be extended pursuant to any Extension Amendment in accordance with Section 2.16.
Swing Line Sublimit means an amount equal to the lesser of (a) $7.5 million and (b) the Aggregate Commitments. The Swing Line Sublimit is part of, and not in addition to, the Aggregate Commitments.
Syndication Agent means Wells Fargo Bank, National Association in its capacity as syndication agent under the Loan Documents, or any successor syndication agent.
Synthetic Debt means, with respect to any Person as of any date of determination thereof, all obligations of such Person in respect of transactions entered into by such Person that are intended to function primarily as a borrowing of funds (including any
minority interest transactions that function primarily as a borrowing) but are not otherwise included in the definition of Indebtedness or as a liability on the Consolidated balance sheet of such Person and the Restricted Subsidiaries in accordance with GAAP.
Synthetic Lease Obligation means the monetary obligation of a Person under an agreement for the use or possession of property (including sale and leaseback transactions), in each case, creating obligations that do not appear on the balance sheet of such Person but which, upon the application of any Debtor Relief Laws to such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).
Taxes means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Term Facility means the credit facilities under the Term Loan Credit Agreement.
Term Loan Credit Agreement means the Credit Agreement dated as of April 6, 2012 among the Borrower, JPMCB, as administrative agent and collateral agent, and the other parties thereto, as the same may be amended, restated, modified, supplemented, extended, renewed, refunded, replaced or refinanced from time to time in one or more agreements (in each case with the same or new lenders, institutional investors or agents), including any agreement extending the maturity thereof or otherwise restructuring all or any portion of the Indebtedness thereunder or increasing the amount loaned or issued thereunder or altering the maturity thereof, in each case as and to the extent permitted by this Agreement (including, without limitation, Section 7.02(d) hereof) and the Intercreditor Agreement.
Term Loan Documents means the Term Loan Credit Agreement and all security agreements, pledge agreements and other agreements or instruments executed in connection therewith.
Term Obligations has the meaning specified in the Intercreditor Agreement.
Term Priority Collateral has the meaning specified in the Intercreditor Agreement.
Title Company means any title insurance company as shall be retained by the Borrower and reasonably acceptable to the Collateral Agent.
Total Debt means, at any date of determination (a) the aggregate principal amount of Indebtedness (other than contingent Indebtedness of the type described in clause (b) of the definition of Indebtedness and obligations under Swap Contracts permitted by Section 7.02(a) (except to the extent any such Swap Contract has terminated)) of Holdings and its Restricted Subsidiaries outstanding as of such date, in the amount that would be reflected on a balance sheet prepared as of such date on a Consolidated basis in accordance with GAAP less (b) the aggregate amount of unrestricted cash and Cash Equivalents of Holdings and its Restricted Subsidiaries on such date in excess of $5.0 million.
Total Outstandings means, on any date, the aggregate Outstanding Amount of all Loans and all L/C Obligations, after giving effect to any borrowings or repayments of Loans occurring on such date.
Transaction means, collectively, (a) the execution of the Term Facility and the borrowing of term loans thereunder by the Borrower, (b) the entering into the Loan Documents by the Loan Parties and their applicable Subsidiaries, (c) the repayment and termination of the Mezzanine Facility and the Existing Term Loan Facility and (d) the payment of the fees and expenses incurred in connection with the consummation of the foregoing.
Transaction Expenses means fees and expenses incurred in connection with the closing of this Agreement and the Term Facility.
Type means, with respect to a Loan, its character as a Base Rate Loan or a LIBO Rate Loan.
UCC means the Uniform Commercial Code as in effect in the State of New York; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral or the availability of any remedy under the Loan Documents is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, UCC means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection, priority or availability of such remedy.
Unfunded Pension Liability means the excess of a Pension Plans benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plans assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year.
United States and U.S. mean the United States of America.
Unreimbursed Amount has the meaning specified in Section 2.03(c)(i).
Unrestricted Subsidiary means (a) each Subsidiary of Holdings listed on Schedule 5.13 and designated as an Unrestricted Subsidiary, (b) any Subsidiary of Holdings designated by the board of directors of Holdings as an Unrestricted Subsidiary pursuant to Section 6.18 subsequent to the date hereof, and (c) any Subsidiary of an Unrestricted Subsidiary.
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.
U.S. Loan Party means any Loan Party that is organized under the laws of one of the states of the United States of America and that is not a CFC.
U.S. Tax Compliance Certificate has the meaning specified in Section 3.01(g)(iii).
1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words include, includes and including shall be deemed to be followed by the phrase without limitation. The word will shall be construed to have the same meaning and effect as the word shall. Unless the context requires otherwise, (i) any definition of or reference to any Law, agreement, instrument or other document (including any Organization Document) shall be construed as referring to such Law, agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Persons successors and assigns, (iii) the words herein, hereof and hereunder, and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Preliminary Statements, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Preliminary Statements, Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words asset and property shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. Knowledge shall mean the actual knowledge of a Responsible Officer of the Borrower after reasonable investigation.
(b) In the computation of periods of time from a specified date to a later specified date, the word from means from and including; the words to and until each mean to but excluding; and the word through means to and including.
(c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
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 applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.
1.04 Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such
ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
1.05 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to New York City time (daylight or standard, as applicable).
1.06 Letter of Credit Amounts. Unless otherwise specified, all references herein to the amount of a Letter of Credit at any time shall be deemed to be the Stated Amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by the terms of any Issuer Documents related thereto, provides for one or more automatic increases in the Stated Amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum Stated Amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum Stated Amount is in effect at such time.
1.07 Senior Debt. The Loans and other Obligations are hereby designated as Senior Debt and Designated Senior Debt (or other similar terms) for all purposes of any Subordinated Indebtedness.
1.08 Available Amount Transactions. 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.
1.09 Pro Forma Calculations.
(a) Notwithstanding anything to the contrary herein, the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio shall be calculated in the manner prescribed by this Section 1.09.
(b) For purposes of calculating the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio, Specified Transactions (and the incurrence or repayment of any Indebtedness in connection therewith) that have been made (i) during the applicable Measurement Period or (ii) subsequent to such Measurement 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 Consolidated EBITDA and the component financial definitions used therein attributable to any Specified Transaction) had occurred on the first day of the applicable Measurement Period. If since the beginning of any applicable Measurement Period any Person that subsequently became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any of its Restricted Subsidiaries since the beginning of such Measurement Period shall have made any Specified Transaction that would have required adjustment pursuant to this Section 1.09, then the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio shall be calculated to give pro forma effect thereto in accordance with this Section 1.09.
(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 responsible financial or accounting officer of the Borrower and may include, for the avoidance of doubt, the amount of cost savings and synergies projected by the Borrower in good faith to be realized as a result of specified actions taken, committed to be taken or expected to be taken (calculated on a pro forma basis as though such cost savings and synergies had been realized on the first day of such period and as if such cost savings and synergies were realized during the entirety of such period) relating to such Specified Transaction, net of the amount of actual benefits theretofore realized during such period from such actions; provided that (i) such amounts are reasonably identifiable, quantifiable and supportable in the good faith judgment of the Borrower, (ii) such actions are taken, committed to be taken or expected to be taken no later than twelve (12) months after the date of such Specified Transaction, (iii) no amounts shall be added pursuant to this clause (c) to the extent duplicative of any amounts that are otherwise added back in computing Consolidated EBITDA, whether through a pro forma adjustment or otherwise, with respect to such period and (iv) the aggregate amount of cost savings and synergies added pursuant to this clause (c) for any such period after the Closing Date shall not exceed 10% of Consolidated EBITDA for such Measurement Period (giving pro forma effect to the relevant Specified Transaction (but not to any cost savings or synergies)).
(d) In the event that the Borrower or any Restricted Subsidiary incurs (including by assumption or guarantees) or repays (including by redemption, repayment, retirement or extinguishment) any Indebtedness included in the calculations of the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio, as the case may be (in each case, other than Indebtedness incurred or repaid hereunder), (i) during the applicable Measurement Period or (ii) subsequent to the end of the applicable Measurement Period and prior to or simultaneously with the event for which the calculation of any such ratio is made, then the Consolidated Fixed Charge Coverage Ratio and the Consolidated Leverage Ratio shall be calculated giving pro forma effect to such incurrence or repayment of Indebtedness, to the extent required, as if the same had occurred on the last day of the applicable Measurement Period.
ARTICLE II
THE COMMITMENTS AND CREDIT EXTENSIONS
2.01 Committed Loans; Reserves.
(a) Subject to the terms and conditions set forth herein, each Lender severally agrees to make loans (each such loan, a Committed Loan) to the Borrower from time to time, on any Business Day during the Availability Period, subject in each case to the following limitations:
(i) after giving effect to any Committed Borrowing, the Total Outstandings shall not exceed the lesser of (A) the Aggregate Commitments, or (B) the Borrowing Base;
(ii) after giving effect to any Committed Borrowing, the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lenders Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lenders Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed the lesser of (x) such Lenders Commitment, or (y) such Lenders Applicable Percentage of the Borrowing Base; and
(iii) the Outstanding Amount of all L/C Obligations shall not at any time exceed the Letter of Credit Sublimit.
Within the limits of each Lenders Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01, prepay under Section 2.05, and reborrow under this Section 2.01. Committed Loans may be Base Rate Loans or LIBO Rate Loans, as further provided herein. Any Extended Loans made in accordance with Section 2.16 and an Extension Amendment shall be subject to this Article II and shall constitute Committed Loans for all purposes hereunder.
2.02 Borrowings, Conversions and Continuations of Committed Loans.
(a) Committed Loans (other than Swing Line Loans) shall be either Base Rate Loans or LIBO Rate Loans as the Borrower may request subject to and in accordance with this Section 2.02. All Swing Line Loans shall be only Base Rate Loans. Subject to the other provisions of this Section 2.02, Committed Borrowings of more than one Type may be incurred at the same time.
(b) Each Committed Borrowing, each conversion of Committed Loans from one Type to the other, and each continuation of LIBO Rate Loans shall be made upon the Borrowers irrevocable notice to the Administrative Agent, which may be given by telephone. Each such notice must be received by the Administrative Agent not later than 2:00 p.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of LIBO Rate Loans or of any conversion of LIBO Rate Loans to Base Rate Loans, and (ii) one Business Day prior to the requested date of any Borrowing of Base Rate Loans. Each telephonic notice by the Borrower pursuant to this Section 2.02(b) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice or Conversion/Continuation Notice, as the case may be, appropriately completed and signed by a Responsible Officer of the Borrower. Each Borrowing of, conversion to or continuation of LIBO Rate Loans shall be in a principal amount of $2.0 million or a whole multiple of $1.0 million in excess thereof. Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate Committed Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each Committed Loan Notice (whether telephonic or written) shall specify (A) the requested date of the Borrowing (which shall be a Business Day), (B) the principal amount of Committed Loans to be borrowed, (C) the Type of Committed Loans to be borrowed, and (D) if applicable, the duration of the Interest Period with respect thereto. Each Conversion/ Continuation Notice (whether telephonic or written) shall specify (1) whether the Borrower is requesting a conversion of Committed Loans from one Type to the other, or a continuation of LIBO Rate Loans, (2)
the requested date of the conversion or continuation (which shall be a Business Day), (3) the principal amount of Committed Loans to be converted or continued, (4) the Type of Committed Loans to which existing Committed Loans are to be converted, and (5) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Committed Loan in a Committed Loan Notice or if the Borrower fails to give a timely notice of a conversion or continuation in a Conversion/Continuation Notice, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable LIBO Rate Loans. If the Borrower requests a Borrowing of LIBO Rate Loans in any such Committed Loan Notice or a conversion to or continuation of LIBO Rate Loans in a Conversion/Continuation Notice, but fails to specify an Interest Period, the Borrower will be deemed to have specified an Interest Period of one month. Notwithstanding anything to the contrary herein, a Swing Line Loan may not be converted to a LIBO Rate Loan.
(c) If less than a full Borrowing of Committed Loans is converted, such conversion shall be made pro rata among the Lenders based upon their Applicable Percentages for the applicable Loans.
(d) Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Applicable Percentage of the applicable Committed Loans, and if no timely notice of a conversion or continuation in a Conversion/ Continuation Notice is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in Section 2.02(b). In the case of a Committed Borrowing, each Lender shall make the amount of its Committed Loan available to the Administrative Agent in immediately available funds at the Administrative Agents Office not later than 1:00 p.m. on the Business Day specified in the applicable Committed Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01), the Administrative Agent shall use reasonable efforts to make all funds so received available to the Borrower in like funds by no later than 4:00 p.m. on the day of receipt by the Administrative Agent either by (i) crediting the account of the Borrower on the books of JPMCB with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower; provided, however, that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the Borrower, there are L/C Borrowings outstanding, then the proceeds of such Borrowing, first, shall be applied to the payment in full of any such L/C Borrowings, and second, shall be made available to the Borrower as provided above.
(e) Each Borrowing of Committed Loans (other than Extended Loans) shall be made by the Lenders pro rata in accordance with their respective Applicable Percentage with respect to the applicable Class. Each Borrowing of Extended Loans under this Agreement shall be made by the Lenders of the relevant Extension Series thereof pro rata on the basis of their then-applicable Extended Commitments for the applicable Extension Series. The failure of any Lender to make any Loan shall neither
relieve any other Lender of its obligation to fund its Loan in accordance with the provisions of this Agreement nor increase the obligation of any such other Lender.
(f) The Administrative Agent, without the request of the Borrower, may advance any interest, fee, service charge, Credit Party Expenses, or other payment to which any Credit Party is entitled from the Loan Parties pursuant hereto or any other Loan Document and may charge the same to the Loan Account notwithstanding that an Overadvance may result thereby. The Administrative Agent shall deliver to the Borrower a statement of any such advance or charge promptly after the making thereof (or in the case of Credit Party Expenses, at the time that the five (5) Business Days notice is furnished) in reasonable detail sufficient to allow the Borrower to verify such interest, fee, service charge, Credit Party Expenses, or other payment. Such action on the part of the Administrative Agent shall not constitute a waiver of the Administrative Agents rights and the Borrowers obligations under Section 2.05. Any amount which is added to the principal balance of the Loan Account as provided in this Section 2.02(f) shall bear interest at the interest rate then and thereafter applicable to Base Rate Loans.
(g) Except as otherwise provided herein, a LIBO Rate Loan may be continued or converted only on the last day of an Interest Period for such LIBO Rate Loan. During the existence of an Event of Default, no Loans may be requested as, converted to or continued as LIBO Rate Loans without the consent of the Required Lenders.
(h) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for LIBO Rate Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in the Prime Rate used in determining the Base Rate promptly following the public announcement of such change.
(i) After giving effect to all Committed Borrowings, all conversions of Committed Loans from one Type to the other, and all continuations of Committed Loans as the same Type, there shall not be more than ten (10) Interest Periods in effect with respect to Committed Loans.
(j) The Administrative Agent, the Lenders, the Swing Line Lender and the L/C Issuers shall have no obligation to make any Loan or to provide any Letter of Credit if an Overadvance would result. The Administrative Agent may, in its discretion, make Permitted Overadvances without the consent of the Lenders, the Swing Line Lender and any L/C Issuer and each Lender shall be bound thereby. Any Permitted Overadvance may constitute a Swing Line Loan. A Permitted Overadvance is for the account of the Borrower and shall constitute a Loan and an Obligation. The making of any such Permitted Overadvance on any one occasion shall not obligate the Administrative Agent or any Lender to make or permit any Permitted Overadvance on any other occasion or to permit such Permitted Overadvances to remain outstanding. The making by the Administrative Agent of a Permitted Overadvance shall not modify or abrogate any of the provisions of Section 2.03 regarding the Lenders obligations to purchase participations with respect to Letter of Credits. The Administrative Agent shall have no liability for,
and no Loan Party or Credit Party shall have the right to, or shall, bring any claim of any kind whatsoever against the Administrative Agent with respect to inadvertent Overadvances (i.e., where an Overadvance results from changed circumstances beyond the control of the Administrative Agent (such as a reduction in the collateral value)) regardless of the amount of any such Overadvance(s).
2.03 Letters of Credit.
(a) The Letter of Credit Commitment.
(i) Subject to the terms and conditions set forth herein, (A) each L/C Issuer agrees, in reliance upon the agreements of the Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit for the account of the Borrower and the Subsidiary Guarantors, and to amend or extend Letters of Credit previously issued by it, in accordance with Section 2.03(b), below, and (2) to honor drawings under the Letters of Credit; and (B) the Lenders severally agree to participate in Letters of Credit issued for the account of such Loan Parties and any drawings thereunder; provided that, after giving effect to any L/C Credit Extension with respect to any Letter of Credit, (x) the Total Outstandings shall not exceed the lesser of the Aggregate Commitments or the Borrowing Base, (y) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lenders Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lenders Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lenders Commitment, and (z) the Outstanding Amount of the L/C Obligations shall not exceed the Letter of Credit Sublimit. Each request by the Borrower for the issuance or amendment of a Letter of Credit shall be deemed to be a representation by the Borrower that the L/C Credit Extension so requested complies with the conditions set forth in the proviso to the preceding sentence. Within the foregoing limits, and subject to the terms and conditions hereof, the Borrowers ability to obtain Letters of Credit shall be fully revolving, and accordingly the Borrower may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.
(ii) No L/C Issuer shall issue any Letter of Credit, if:
(A) subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension, unless the Required Lenders have approved such expiry date; or
(B) the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless cash collateralized or subject to credit support reasonably satisfactory to the Administrative Agent and the applicable L/C Issuer on or before five (5) days prior to the Letter of Credit Expiration Date.
(iii) No L/C Issuer shall be under any obligation to issue any Letter of Credit if:
(A) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain any L/C Issuer from issuing such Letter of Credit, or any Law applicable to such L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over any L/C Issuer shall prohibit, or request that such L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon any L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon any L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such L/C Issuer in good faith deems material to it;
(B) the issuance of such Letter of Credit would violate one or more policies of such L/C Issuer applicable to letters of credit generally;
(C) such Letter of Credit is to be denominated in a currency other than Dollars; or
(D) such Letter of Credit contains any provisions for automatic reinstatement of the Stated Amount after any drawing thereunder.
(iv) No L/C Issuer shall amend any Letter of Credit if such L/C Issuer would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.
(v) Each L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article IX with respect to any acts taken or omissions suffered by each L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term Administrative Agent as used in Article IX, included each L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to each L/C Issuer.
(b) Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.
(i) Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the applicable L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Borrower. Such Letter of Credit Application must be received by the applicable L/C Issuer and the Administrative Agent not later than 2:00 p.m. at least three (3) Business Days (or such other date and time as
the Administrative Agent and such L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to such L/C Issuer: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (G) such other matters as such L/C Issuer may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to such L/C Issuer (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as such L/C Issuer may require. Additionally, the Borrower shall furnish to the applicable L/C Issuer and the Administrative Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any Issuer Documents, as such L/C Issuer or the Administrative Agent may require.
(ii) Promptly after receipt of any Letter of Credit Application, the applicable L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such L/C Issuer will provide the Administrative Agent with a copy thereof. Unless such L/C Issuer has received written notice from any Lender, the Administrative Agent or any Loan Party, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article IV, shall not then be satisfied, then, subject to the terms and conditions hereof, the applicable L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower (or the applicable Subsidiary Guarantor) or enter into the applicable amendment, as the case may be, in each case in accordance with such L/C Issuers usual and customary business practices. Immediately upon the issuance or amendment of each Letter of Credit, each Lender shall be deemed to (without any further action), and hereby irrevocably and unconditionally agrees to, purchase from the applicable L/C Issuer, without recourse or warranty, a risk participation in such Letter of Credit in an amount equal to the product of such Lenders Applicable Percentage times the amount of such Letter of Credit. Upon any change in the Commitments under this Agreement, it is hereby agreed that with respect to all L/C Obligations, there shall be an automatic adjustment to the participations hereby created to reflect the new Applicable Percentages of the assigning and assignee Lenders.
(iii) If the Borrower so requests in any applicable Letter of Credit Application, the applicable L/C Issuer may, in its sole and absolute discretion, agree to issue a Standby Letter of Credit that has automatic extension provisions (each, an Auto-Extension Letter of Credit); provided that any such Auto-Extension Letter of Credit must permit such L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving
prior notice to the beneficiary thereof not later than a day (the Non-Extension Notice Date) in each such twelve-month period to be agreed upon by the applicable L/C Issuer and the Borrower at the time such Letter of Credit is issued. Unless otherwise directed by the applicable L/C Issuer, the Borrower shall not be required to make a specific request to such L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the applicable L/C Issuer to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that such L/C Issuer shall not permit any such extension if (A) such L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its revised form (as extended) under the terms hereof (by reason of the provisions of clause (ii) or (iii) of Section 2.03(a) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five Business Days before the Non-Extension Notice Date (1) from the Administrative Agent that the Required Lenders have elected not to permit such extension or (2) from the Administrative Agent, any Lender or the Borrower that one or more of the applicable conditions specified in Section 4.02, is not then satisfied, and in each such case directing the applicable L/C Issuer not to permit such extension.
(iv) Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the applicable L/C Issuer will also deliver to the Borrower and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.
(c) Drawings and Reimbursements; Funding of Participations.
(i) Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the applicable L/C Issuer shall notify the Borrower and the Administrative Agent thereof; provided, however, that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such L/C Issuer and the Lenders with respect to any such payment. Not later than 11:00 a.m. within 2 Business Days of the date of any payment by the applicable L/C Issuer under a Letter of Credit (each such date, an Honor Date), the Borrower shall reimburse such L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing. If the Borrower fails to so reimburse the applicable L/C Issuer by such time, the Administrative Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the Unreimbursed Amount), and the amount of such Lenders Applicable Percentage thereof. In such event, the Borrower shall be deemed to have requested a Committed Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02 (other than the delivery of a Committed Loan Notice).
Any notice given by any L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing;
provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
(ii) Each Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Administrative Agent for the account of the applicable L/C Issuer at the Administrative Agents Office in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the applicable L/C Issuer.
(iii) With respect to any Unreimbursed Amount that is not fully refinanced by a Committed Borrowing of Base Rate Loans because the conditions set forth in Section 4.02 cannot be satisfied or for any other reason, the Borrower shall be deemed to have incurred from the applicable L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate. In such event, each Lenders payment to the Administrative Agent for the account of the applicable L/C Issuer pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.
(iv) Until each Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.03(c) to reimburse the applicable L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lenders Applicable Percentage of such amount shall be solely for the account of such L/C Issuer.
(v) Each Lenders obligation to make Committed Loans or L/C Advances to reimburse the L/C Issuers for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against any L/C Issuer, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lenders obligation to make Committed Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02 (other than delivery by the Borrower of a Committed Loan Notice). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the L/C Issuers for the amount of any payment made by any L/C Issuer under any Letter of Credit, together with interest as provided herein.
(vi) If any Lender fails to make available to the Administrative Agent for the account of any L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), the applicable L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest
thereon for the period from the date such payment is required to the date on which such payment is immediately available to such L/C Issuer at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by such L/C Issuer in accordance with banking industry rules on interbank compensation plus any administrative, processing or similar fees customarily charged by such L/C Issuer in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lenders Committed Loan included in the relevant Committed Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A certificate of the applicable L/C Issuer submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.
(d) Repayment of Participations.
(i) At any time after any L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lenders L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Administrative Agent receives for the account of such L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent), the Administrative Agent will distribute to such Lender its Applicable Percentage thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lenders L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.
(ii) If any payment received by the Administrative Agent for the account of any L/C Issuer pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 11.05 (including pursuant to any settlement entered into by such L/C Issuer in its discretion), each Lender shall pay to the Administrative Agent for the account of the applicable L/C Issuer its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(e) Obligations Absolute. The obligation of the Borrower to reimburse each L/C Issuer for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
(i) any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;
(ii) the existence of any claim, counterclaim, setoff, defense or other right that the Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or
any such transferee may be acting), any L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
(iv) any payment by any L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by any L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;
(v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or any of the Restricted Subsidiaries; or
(vi) the fact that any Event of Default shall have occurred and be continuing.
The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrowers instructions or other irregularity, the Borrower will immediately notify the applicable L/C Issuer. The Borrower shall be conclusively deemed to have waived any such claim against such L/C Issuer and its correspondents unless such notice is given as aforesaid.
(f) Role of L/C Issuer. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, no L/C Issuer shall have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the L/C Issuers, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of any L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; (iii) any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit or any error in interpretation of technical terms; or (iv) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Issuer
Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrowers pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. None of the L/C Issuers, the Administrative Agent, any of their respective Related Parties nor any correspondent, participant or assignee of any L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (vi) of Section 2.03(e); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against any L/C Issuer, and each L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such L/C Issuers willful misconduct or gross negligence or such L/C Issuers willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, each L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary (or any such L/C Issuer may refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit), and no L/C Issuer shall be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
(g) Cash Collateral. Upon the request of the Administrative Agent, (i) if any L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has resulted in an L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then Outstanding Amount of all L/C Obligations. Sections 2.05 and 8.02(d) set forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.05 and Section 8.02(d), Cash Collateralize means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the L/C Issuers and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances in an amount equal to 105% of the Outstanding Amount of all L/C Obligations, pursuant to documentation in form and substance satisfactory to the Administrative Agent and the L/C Issuers (which documents are hereby consented to by the Lenders). Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Collateral Agent, for the benefit of the L/C Issuers and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, deposit accounts at JPMCB; interest or profits, if any, on such investments shall accumulate in such account. If at any time the Administrative Agent determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the Administrative Agent or that the total amount of such funds is less than the aggregate Outstanding Amount of all L/C Obligations, the Borrower will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited as Cash Collateral, an amount equal to the excess of (x) such aggregate
Outstanding Amount over (y) the total amount of funds, if any, then held as Cash Collateral that the Administrative Agent determines to be free and clear of any such right and claim. Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Laws, to reimburse the L/C Issuers and, to the extent not so applied, shall thereafter (A) if an Event of Default then exists and is continuing, be applied to satisfy other Obligations, or (B) otherwise remitted to the operating account of the Borrower maintained with the Administrative Agent.
(h) Applicability of ISP and UCP. Unless otherwise expressly agreed by the applicable L/C Issuer and the Borrower when a Letter of Credit is issued, (i) the rules of the ISP shall apply to each Standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most recently published by the International Chamber of Commerce at the time of issuance shall apply to each Commercial Letter of Credit.
(i) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent for the account of each Lender in accordance with its Applicable Percentage a Letter of Credit fee (the Letter of Credit Fee) (i) for each Commercial Letter of Credit equal to 50% of the Applicable Margin for LIBO Rate Loans times the daily maximum amount available to be drawn under each such Commercial Letter of Credit, and (ii) for each Standby Letter of Credit, equal to the Applicable Margin for LIBO Rate Loans times the daily maximum amount available to be drawn under each such Standby Letter of Credit. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with Section 1.06. Letter of Credit Fees shall be (i) due and payable on the first Business Day after the end of each calendar quarter, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand, and (ii) computed on a quarterly basis in arrears. If there is any change in the Applicable Margin during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Margin separately for each period during such quarter that such Applicable Margin was in effect. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at the Default Rate.
(j) Fronting Fee and Documentary and Processing Charges Payable to L/C Issuer. The Borrower shall pay directly to each L/C Issuer for its own account a fronting fee (i) with respect to each Commercial Letter of Credit, at the rate per annum equal to one-eighth of one percent (0.125%), computed on the amount of such Letter of Credit, and payable upon the issuance thereof (ii) with respect to any amendment of a Commercial Letter of Credit increasing the amount of such Letter of Credit, at a rate separately agreed between the Borrower and each L/C Issuer, computed on the amount of such increase, and payable upon the effectiveness of such amendment, and (iii) with respect to each Standby Letter of Credit, at the rate per annum equal to one-eighth of one percent (0.125%), computed on the daily amount available to be drawn under such Letter of Credit and on a quarterly basis in arrears. Such fronting fees shall be due and payable
on the first Business Day after the end of each calendar quarter, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of the Letter of Credit shall be determined in accordance with Section 1.06. In addition, the Borrower shall pay directly to each L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.
(k) Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.
(l) Letters of Credit Issued for Subsidiary Guarantor. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary Guarantor, the Borrower shall be obligated to reimburse each L/C Issuer hereunder for any and all drawings under such Letter of Credit. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of Subsidiary Guarantors inures to the benefit of the Borrower, and that the Borrowers business derives substantial benefits from the businesses of such Subsidiary Guarantors.
(m) Existing Letters of Credit. Schedule 2.03(m) contains a schedule of certain letters of credit issued prior to the Closing Date (the Existing Letters of Credit) for the account of the Borrower by the issuers set forth on such Schedule 2.03(m). On the Closing Date, (i) the Existing Letters of Credit, to the extent outstanding, shall be automatically and without further action by the parties thereto converted to Letters of Credit issued pursuant to this Section 2.03 for the account of the Borrower and subject to the provisions hereof, and for this purpose the fees specified in Section 2.03(i) and (j) shall be payable (in substitution for any fees set forth in the applicable letter of credit reimbursement agreements or applications relating to the Existing Letters of Credit) as if the Existing Letters of Credit had been issued on the Closing Date, (ii) issuers of the Existing Letters of Credit, if not otherwise L/C Issuers hereunder, shall be deemed to be L/C Issuers hereunder with respect to the Existing Letters of Credit only, (iii) the face amount of the Existing Letters of Credit shall be included in the calculation of L/C Obligations and (iv) all liabilities of the Borrower with respect to the Existing Letters of Credit shall constitute Obligations.
(n) Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, and any L/C Obligations or Swing Line Loans exist at the time a Lender becomes a Defaulting Lender, then:
(i) all or any part of such L/C Obligations and Swing Line Loans shall be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent (A) the aggregate Applicable Percentages of all non-Defaulting Lenders of the Total Outstandings does not exceed the lesser of (1) the total of all non-Defaulting Lenders Commitments and (2) the aggregate Applicable
Percentages of all non-Defaulting Lenders of the Borrowing Base then in effect, and (B) the conditions set forth in Section 4.02 are satisfied at such time;
(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one (1) Business Day following notice by the Administrative Agent (A) first, prepay such Defaulting Lenders Applicable Percentage of the outstanding Swing Line Loans (after giving effect to any partial reallocation pursuant to clause (i) above) and (B) second, cash collateralize such Defaulting Lenders Applicable Percentage of the L/C Obligations (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.03(g) for so long as such L/C Obligations are outstanding;
(iii) if the Borrower cash collateralizes any portion of such Defaulting Lenders Applicable Percentage of the L/C Obligations pursuant to this Section 2.03(n), the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.03(i) with respect to such Defaulting Lenders Applicable Percentage of the L/C Obligations during the period such Defaulting Lenders Applicable Percentage of the L/C Obligations is cash collateralized;
(iv) if the L/C Obligations attributable to the non-Defaulting Lenders are reallocated pursuant to this Section 2.03(n), then the fees payable to the Lenders pursuant to Section 2.03(i) and Section 2.09(a) shall be adjusted in accordance with such non-Defaulting Lenders Applicable Percentages; or
(v) if any Defaulting Lenders Applicable Percentage of L/C Obligations is neither cash collateralized nor reallocated pursuant to this Section 2.03(n), then, without prejudice to any rights or remedies of any L/C Issuer or any Lender hereunder, all commitment fees that otherwise would have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lenders Commitment that was utilized by such Defaulting Lenders Applicable Percentage of such L/C Obligations) under Section 2.09(a) and letter of credit fees payable under Section 2.03(i) with respect to such Defaulting Lenders Applicable Percentage of the L/C Obligations shall be payable to the applicable L/C Issuer until such LC Obligations are cash collateralized and/or reallocated.
Notwithstanding any provision of this Agreement to the contrary, so long as any Lender is a Defaulting Lender, no L/C Issuer shall be required to issue, amend or increase any Letter of Credit, and the Swing Line Lender shall not be required to fund any Swing Line Loan, unless it is satisfied that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.03(g), and participating interests in any such newly issued or increased Letter of Credit or newly made Swing Line Loan shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.03(n)(i) (and any Defaulting Lender shall not participate therein).
2.04 Swing Line Loans.
(a) The Swing Line. Subject to the terms and conditions set forth herein, the Swing Line Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.04, to make loans (each such loan, a Swing Line Loan) to the Borrower from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Percentage of the Outstanding Amount of Committed Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lenders Commitment; provided, however, that after giving effect to any Swing Line Loan, (i) the Total Outstandings shall not exceed the lesser of (A) the Aggregate Commitments, or (B) the Borrowing Base, and (ii) the aggregate Outstanding Amount of the Committed Loans of any Lender at such time, plus such Lenders Applicable Percentage of the Outstanding Amount of all L/C Obligations at such time, plus such Lenders Applicable Percentage of the Outstanding Amount of all Swing Line Loans at such time shall not exceed such Lenders Commitment, and provided, further, that the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04. Each Swing Line Loan shall bear interest only at a rate based on the Base Rate. Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lenders Applicable Percentage times the amount of such Swing Line Loan.
(b) Borrowing Procedures. Each Swing Line Borrowing shall be made upon the Borrowers irrevocable notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone. Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, and (ii) the requested borrowing date, which shall be a Business Day. Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower. Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof. Unless the Swing Line Lender has received notice (by telephone or in writing) from the Administrative Agent at the request of the Required Lenders prior to 2:00 p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the proviso to the first sentence of Section 2.04(a), or (B) that one or more of the applicable conditions specified in Article IV is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 3:00 p.m. on the
borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower at its office by crediting the account of the Borrower on the books of the Swing Line Lender in immediately available funds.
(c) Refinancing of Swing Line Loans.
(i) The Swing Line Lender at any time in its sole and absolute discretion may request (but, in any event shall weekly, as provided in Section 2.14(a)), on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Lender make a Base Rate Committed Loan in an amount equal to such Lenders Applicable Percentage for the amount of Swing Line Loans then outstanding. Such request shall be made in writing (which written request shall be deemed to be a Committed Loan Notice for purposes hereof) and in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.02. The Swing Line Lender shall furnish the Borrower with a copy of the applicable Committed Loan Notice promptly after delivering such notice to the Administrative Agent. Each Lender shall make an amount equal to its Applicable Percentage of the amount specified in such Committed Loan Notice available to the Administrative Agent in immediately available funds for the account of the Swing Line Lender at the Administrative Agents Office not later than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon, subject to Section 2.04(c)(ii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Swing Line Lender.
(ii) If for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing in accordance with Section 2.04(c)(i), the request for Base Rate Committed Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan and each Lenders payment to the Administrative Agent for the account of the Swing Line Lender pursuant to Section 2.04(c)(i) shall be deemed payment in respect of such participation.
(iii) If any Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lenders Committed Loan included in the relevant Committed Borrowing or funded participation in the relevant
Swing Line Loan, as the case may be. A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.
(iv) Each Lenders obligation to make Committed Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lenders obligation to make Committed Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02. No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.
(d) Repayment of Participations.
(i) At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Applicable Percentage of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lenders risk participation was funded) in the same funds as those received by the Swing Line Lender.
(ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 11.05 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its Applicable Percentage thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate. The Administrative Agent will make such demand upon the request of the Swing Line Lender. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(e) Interest for Account of Swing Line Lender. The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans. Until each Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Lenders Applicable Percentage of any Swing Line Loan, interest in respect of such Applicable Percentage shall be solely for the account of the Swing Line Lender.
(f) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.
2.05 Prepayments.
(a) The Borrower may, upon notice to the Administrative Agent (which notice, if furnished in connection with a refinancing of the Obligations, may be conditional upon the consummation of such refinancing), at any time or from time to time voluntarily prepay Committed Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 2:00 p.m. (A) one Business Day prior to any date of prepayment of LIBO Rate Loans and (B) on the date of prepayment of Base Rate Loans; and (ii) any prepayment of LIBO Rate Loans shall be in a principal amount of $2.0 million or a whole multiple of $1.0 million in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice shall specify the date and amount of such prepayment, the Type(s) of Loans to be prepaid and, if LIBO Rate Loans are to be prepaid, the Interest Period(s) of such Loans. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lenders Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein. Any prepayment of a LIBO Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05. Each such prepayment shall be applied to the Committed Loans of the Lenders in accordance with their respective Applicable Percentages. Notwithstanding the foregoing (and as provided in clause (1) of the proviso to Section 2.16(a)), the Borrower may not prepay Extended Loans of any Extension Series unless such prepayment is accompanied by a pro rata repayment of Existing Loans of the Specified Existing Commitment Class of the Existing Class from which such Extended Loans and Extended Commitments were converted (or such Loans and Commitments of the Existing Class have otherwise been repaid and terminated in full).
(b) The Borrower may, upon irrevocable notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the date of the prepayment, and (ii) any such prepayment shall be in a minimum principal amount of $100,000. Each such notice shall specify the date and amount of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.
(c) If for any reason the Total Outstandings at any time exceed the lesser of the Aggregate Commitments or the Borrowing Base, each as then in effect, the Borrower shall immediately prepay Loans, Swing Line Loans and L/C Borrowings and/or Cash Collateralize the L/C Obligations (other than L/C Borrowings) in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(c) unless after the
prepayment in full of the Loans the Total Outstandings exceed the lesser of the Aggregate Commitments or the Borrowing Base, each as then in effect.
(d) Any Net Cash Proceeds from any Disposition by the Borrower or any of its Restricted Subsidiaries (other than, (i) with respect only to the Term Priority Collateral, such portion of the Net Cash Proceeds that are then required to be paid to the lenders under the Term Facility and (ii) any Disposition of any property permitted by Section 7.05(a), (b), (c), (d), (e), (g), (i) or (j)), whether or not a Cash Dominion Event then exists, shall be paid over to the Administrative Agent on receipt by the Loan Parties and shall be utilized to prepay the Loans in the order of priority set forth in Section 2.05(e). The application of such Net Cash Proceeds to the Loans shall not reduce the Commitments. If all Obligations then due are paid, any excess Net Cash Proceeds shall be remitted to the operating account of the Borrower maintained with the Administrative Agent.
(e) Prepayments made pursuant to Section 2.05, first, shall be applied ratably to the L/C Borrowings and the Swing Line Loans, second, shall be applied ratably to the outstanding Loans, and third, shall be used to Cash Collateralize the remaining L/C Obligations; and the amount remaining, if any, after the prepayment in full of all L/C Borrowings, Swing Line Loans and Committed Loans outstanding at such time and the Cash Collateralization of the remaining L/C Obligations in full may be retained by the Borrower for use in the ordinary course of its business. Upon the drawing of any Letter of Credit that has been Cash Collateralized, the funds held as Cash Collateral shall be applied (without any further action by or notice to or from the Borrower or any other Loan Party) to reimburse the L/C Issuers or the Lenders, as applicable.
2.06 Termination or Reduction of Commitments.
(a) The Borrower may, upon notice to the Administrative Agent, terminate the Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit or from time to time permanently reduce the Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit, provided that (i) any such notice shall be received by the Administrative Agent not later than 2:00 p.m. three Business Days prior to the date of termination or five Business Days prior to the date of reduction, as the case may be, (ii) any such notice shall be irrevocable (except if such termination notice is being furnished in connection with a refinancing of the Obligations, such notice may be conditional upon the consummation of such refinancing; provided that the Borrower would still be required to reimburse Lenders under Section 3.05 for any losses, costs or expenses incurred as a result of any such notice being revoked by the Borrower), (iii) any such partial reduction shall be in an aggregate amount of $5.0 million or any whole multiple of $1.0 million in excess thereof, (iv) the Borrower shall not terminate or reduce (A) the Aggregate Commitments if, after giving effect thereto and to any concurrent prepayments hereunder, the Total Outstandings would exceed the Aggregate Commitments, (B) the Letter of Credit Sublimit if, after giving effect thereto, the Outstanding Amount of L/C Obligations not fully Cash Collateralized hereunder would exceed the Letter of Credit Sublimit, and (C) the Swing Line Sublimit if, after giving effect thereto, and to any concurrent payments hereunder, the Outstanding Amount of
Swing Line Loans hereunder would exceed the Swing Line Sublimit, and (v) with respect to the Commitments, any such termination or reduction shall apply proportionately and permanently to reduce the Commitments of each of the Lenders of such Class, except that, notwithstanding the foregoing, (A) the Borrower may allocate any termination or reduction of Commitments among Classes of Commitments either (1) ratably among Classes or (2) first to the Commitments with respect to any Existing Commitments and second to any Extended Commitments and (B) in connection with the establishment on any date of any Extended Commitments pursuant to Section 2.16, the Existing Commitments of any one or more Lenders providing any such Extended Commitments on such date shall be reduced in an amount equal to the amount of Specified Existing Commitments so extended on such date (provided that (x) after giving effect to any such reduction and to the repayment of any Loans made on such date, the aggregate Outstanding Amount of the Loans (other than Swing Line Loans) of any such Lender, plus such Lenders Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lenders Applicable Percentage of the Outstanding Amount of all Swing Line Loans does not exceed the lesser of such Lenders Commitment or such Lenders Applicable Percentage of the Borrowing Base (such calculation being determined in each case, for the avoidance of doubt, exclusive of such Lenders Extended Commitment and any exposure in respect thereof) and (y) for the avoidance of doubt, any such repayment of Loans contemplated by the preceding clause shall be made in compliance with the requirements of Section 2.12 with respect to the ratable allocation of payments hereunder, with such allocation being determined after giving effect to any conversion pursuant to Section 2.16 of Existing Commitments and Existing Loans into Extended Commitments and Extended Loans respectively, and prior to any reduction being made to the Commitment of any other Lender).
(b) If, after giving effect to any reduction of the Aggregate Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Aggregate Commitments, such sublimit shall be automatically reduced by the amount of such excess.
(c) The Administrative Agent will promptly notify the Lenders of any termination or reduction of the Letter of Credit Sublimit, Swing Line Sublimit, or the Aggregate Commitments under this Section 2.06. Upon any reduction of the Aggregate Commitments, the Commitment of each Lender shall be reduced by such Lenders Applicable Percentage of such reduction amount. All fees accrued until the effective date of any such termination shall be paid on the effective date of such termination.
2.07 Repayment of Loans.
(a) The Borrower shall repay to the Lenders (i) on the Initial Maturity Date, the aggregate principal amount of Committed Loans outstanding on such date (other than Extended Loans) and (ii) on the relevant maturity date for any Extension Series of Extended Commitments, all then outstanding Extended Loans in respect of such Extension Series.
(b) The Borrower shall repay each Swing Line Loan on the Swing Line Maturity Date and in accordance with Section 2.04(c).
2.08 Interest.
(a) Subject to the provisions of Section 2.08(b) below, (i) each Loan which is a LIBO Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the LIBO Rate for such Interest Period plus the Applicable Margin; (ii) each Loan which is a Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin; and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Margin set forth under the applicable level under Base Rate Applicable Margin in the definition of Applicable Margin.
(b) If any amount owed under this Agreement is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. 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.
2.09 Fees. In addition to certain fees described in subsections (i) and (j) of Section 2.03:
(a) Commitment Fee. The Borrower shall pay to the Administrative Agent for the account of each Lender, in accordance with its Applicable Percentage, a commitment fee (the Commitment Fee) equal to 0.25% per annum times the actual daily amount by which the then Aggregate Commitments exceed the sum of (i) the principal amount of Loans (including Swing Line Loans), then outstanding, and (ii) the then L/C Credit Extensions. The commitment fee shall accrue at all times during the Availability Period, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the first Business Day after the end of each calendar quarter, commencing with the first such date to occur after the Closing Date, and on the last day of the Availability Period.
(b) Other Fees. The Borrower shall pay to the Arrangers and the Administrative Agent for their own respective accounts fees in the amounts and at the times specified in the Fee Letter. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.
(c) Defaulting Lender Fees. Subject to Section 2.03(n), the Borrower shall not be obligated to pay the Administrative Agent any Defaulting Lenders ratable share of the fees described in Section 2.03(i) and Section 2.09(a) for the period commencing on the day such Defaulting Lender becomes a Defaulting Lender and continuing for so long as such Lender continues to be a Defaulting Lender.
2.10 Computation of Interest and Fees. All computations of interest for Base Rate Loans when the Base Rate is determined by the Prime Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.
2.11 Evidence of Debt.
(a) The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by the Administrative Agent (the Loan Account) in the ordinary course of business. In addition, each Lender may record in such Lenders internal records, an appropriate notation evidencing the date and amount of each Loan from such Lender, each payment and prepayment of principal of any such Loan, and each payment of interest, fees and other amounts due in connection with the Obligations due to such Lender. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive, absent manifest error, of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent 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 Note, which shall evidence such Lenders Loans (in addition to such Lenders accounts or records). Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto. Upon receipt of an affidavit of a Lender as to the loss, theft, destruction or mutilation of such Lenders Note and upon cancellation of such Note, the Borrower will issue, in lieu thereof, a replacement Note in favor of such Lender, in the same principal amount thereof and otherwise of like tenor.
(b) In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations
in Letters of Credit and Swing Line Loans. In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.
2.12 Payments Generally; Administrative Agents Clawback.
(a) General. All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agents Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lenders Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. 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.
(b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing of LIBO Rate Loans (or in the case of any Borrowing of Base Rate Loans, prior to 12:00 noon on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lenders share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with Section 2.02 (or in the case of a Borrowing of Base Rate Loans, that such Lender has made such share available in accordance with and at the time required by Section 2.02) and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Committed Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation plus any administrative processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans. If the Borrower and such 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 Committed Borrowing to the Administrative Agent, then the amount so paid shall
constitute such Lenders Committed Loan included in such Committed 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.
(ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the time at which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuers hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable L/C Issuer, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the L/C Issuers, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the applicable L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error.
(c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.
(d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Committed Loans, to fund participations in Letters of Credit and Swing Line Loans and to make payments pursuant to Section 11.04(c) are several and not joint. The failure of any Lender to make any Committed Loan, to fund any such participation or to make any payment under Section 11.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Committed Loan, to purchase its participation or to make its payment under Section 11.04(c).
(e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.
2.13 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Committed Loans made by it, or the participations in L/C Obligations or in Swing Line Loans held by it resulting in such Lenders receiving payment of a proportion of the aggregate amount of such Committed Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Committed Loans and subparticipations in L/C Obligations and Swing Line Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Committed Loans and other amounts owing them, provided that:
(i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and
(ii) the provisions of this Section shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Committed Loans or subparticipations in L/C Obligations or Swing Line Loans to any assignee or participant, other than to the Borrower or any Restricted Subsidiary thereof (as to which the provisions of this Section shall apply).
Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation.
2.14 Settlement Amongst Lenders.
(a) The amount of each Lenders Applicable Percentage of outstanding Loans (including outstanding Swing Line Loans, except that settlements of Swing Line Loans during the months of November and December of each year shall be required to be made by the Swing Line Lender only with respect to those Swing Line Loans in excess of $2.0 million in the aggregate only (the Excess Swing Line Loans)) shall be computed weekly (or more frequently in the Administrative Agents discretion) and shall be adjusted upward or downward based on all Loans (including Swing Line Loans other than Excess Swing Line Loans) and repayments of Loans (including Swing Line Loans other than Excess Swing Line Loans) received by the Administrative Agent as of 3:00 p.m. on the first Business Day (such date, the Settlement Date) following the end of the period specified by the Administrative Agent.
(b) The Administrative Agent shall deliver to each of the Lenders promptly after a Settlement Date a summary statement of the amount of outstanding Committed Loans for the period and the amount of repayments fees received for the period. As reflected on the summary statement, (i) the Administrative Agent shall transfer to each Lender its Applicable Percentage of repayments, and (ii) each Lender shall transfer to the Administrative Agent (as provided below) or the Administrative Agent shall transfer to each Lender, such amounts as are necessary to insure that, after giving effect to all such transfers, the amount of Committed Loans made by each Lender with respect to Committed Loans to the Borrower shall be equal to such Lenders Applicable Percentage of Committed Loans outstanding as of such Settlement Date. If the summary statement requires transfers to be made to the Administrative Agent by the Lenders and is received prior to 12:00 Noon on a Business Day, such transfers shall be made in immediately available funds no later than 3:00 p.m. that day; and, if received after 12:00 Noon, then no later than 3:00 p.m. on the next Business Day. The obligation of each Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Administrative Agent. If and to the extent any Lender shall not have so made its transfer to the Administrative Agent, such Lender agrees to pay to the Administrative Agent, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent, equal to the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation plus any administrative, processing, or similar fees customarily charged by the Administrative Agent in connection with the foregoing.
(c) The Administrative Agent shall deliver to the applicable Lenders promptly after the Administrative Agents receipt thereof, all payments of interest, fees and Credit Party Expenses to which each such Lender is entitled.
(d) If any Lender shall fail to make any payment required to be made by it hereunder, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lenders obligations hereunder until all such unsatisfied obligations are fully paid. If at any time prior to the acceleration or maturity of the Loans, the Administrative Agent shall receive any payment in respect of principal of a Loan or a reimbursement of a L/C Extension while one or more Defaulting Lenders shall be party to this Agreement, the Administrative Agent shall apply such payment first to the Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its pro rata share until such time as such Borrowing(s) are paid in full or each Lender (including each Defaulting Lender) is owed its Applicable Percentage of all Loans then outstanding. After acceleration or maturity of the Loans, all principal will be paid ratably as provided in Section 8.03.
2.15 Incremental Commitments.
(a) The Borrower may, by written notice to the Administrative Agent from time to time (but on not more than two occasions), request Incremental Commitments in an amount not to exceed the Incremental Amount from one or more Incremental Lenders,
which may include any existing Lender; provided that each Incremental Lender, if not already a Lender hereunder, shall be subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld or delayed). Such notice shall set forth (i) the amount of the Incremental Commitments being requested (which shall be in minimum increments of $1.0 million and a minimum amount of $5.0 million or such lesser amount equal to the remaining Incremental Amount) and (ii) the date on which such Incremental Commitments are requested to become effective (which shall not be less than 10 Business Days nor more than 60 days after the date of such notice).
(b) The Borrower and each Incremental Lender shall execute and deliver to the Administrative Agent an Incremental Assumption Agreement and such other documentation as the Administrative Agent shall reasonably specify to evidence the Incremental Commitment of each Incremental Lender. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Assumption Agreement. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Assumption Agreement, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Commitment and the Incremental Loans evidenced thereby.
(c) Notwithstanding the foregoing, no Incremental Commitment shall become effective under this Section 2.15 unless (i) the representations and warranties of the Borrower and each other Loan Party contained in this Agreement and the other Loan Documents shall be true in all material respects on such date, (ii) no Default or Event of Default shall have occurred or be continuing or would result therefrom, (iii) the Administrative Agent shall have received (with sufficient copies for each of the Incremental Lenders) an officers certificate executed by a Responsible Officer of the Borrower certifying, together with (unless otherwise specified in the applicable Incremental Assumption Agreement) legal opinions, board resolutions and other closing certificates reasonably requested by the Administrative Agent and consistent with those delivered on the Closing Date under Section 4.01, (iv) all fees and expenses owing to the Administrative Agent or the Incremental Lenders in connection with such Incremental Commitments shall have been paid and (v) the Incremental Assumption Agreement and any other documents entered into in connection therewith shall be reasonably satisfactory to the Administrative Agent.
2.16 Extension Offers.
(a) The Borrower may at any time and from time to time request that all or a portion of the Commitments of any Class, existing at the time of such request (each, an Existing Commitment and any related revolving credit loans under any such facility, Existing Loans; each Existing Commitment and related Existing Loans together being referred to as an Existing Class) be converted to extend the termination date thereof and the scheduled maturity date(s) of any payment of principal with respect to all or a portion of any principal amount of Existing Loans related to such Existing Commitments (any such Existing Commitments which have been so extended, Extended Commitments and any related revolving credit loans, Extended Loans) and to provide for other terms consistent with this Section 2.16. Prior to entering into any Extension
Amendment with respect to any Extended Commitments, the Borrower shall provide a notice to the Administrative Agent (who shall provide a copy of such notice to each of the Lenders of the applicable Class of Existing Commitments and which such request shall be offered equally to all Lenders) (an Extension Request) setting forth the proposed terms of the Extended Commitments to be established thereunder, which terms shall be substantially similar to those applicable to the Existing Commitments from which they are to be extended (the Specified Existing Commitment Class) except that (w) all or any of the final maturity dates of such Extended Commitments may be delayed to later dates than the final maturity dates of the Existing Commitments of the Specified Existing Commitment Class, (x) (A) the interest rates, interest margins, rate floors, upfront fees, funding discounts, original issue discounts and premiums with respect to the Extended Commitments may be different from those for the Existing Commitments of the Specified Existing Commitment Class and/or (B) additional fees and/or premiums may be payable to the Lenders providing such Extended Commitments in addition to or in lieu of any of the items contemplated by the preceding clause (A), (y) (A) the undrawn revolving credit commitment fee rate with respect to the Extended Commitments may be different from such rate for Existing Commitments of the Specified Existing Commitment Class and (B) the Extension Amendment may provide for other covenants and terms that apply to any period after the Latest Maturity Date; provided that, notwithstanding anything to the contrary in this Section 2.16 or otherwise, (1) the borrowing and repayment (other than in connection with a permanent repayment and termination of commitments (which shall be governed by clause (3) below)) of the Extended Loans under any Extended Commitments shall be made on a pro rata basis with any borrowings and repayments of the Existing Loans of the Specified Existing Commitment Class (the mechanics for which may be implemented through the applicable Extension Amendment and may include technical changes related to the borrowing and replacement procedures of the Specified Existing Commitment Class), (2) assignments and participations of Extended Commitments and Extended Loans shall be governed by the assignment and participation provisions set forth in Section 11.06 and (3) subject to the applicable limitations set forth in Section 2.06, permanent repayments of Extended Loans (and corresponding permanent reduction in the related Extended Commitments) shall be permitted as may be agreed between the Borrower and the Lenders thereof. No Lender shall have any obligation to agree to have any of its Loans or Commitments of any Existing Class converted into Extended Loans or Extended Commitments pursuant to any Extension Request. Any Extended Commitments of any Extension Series shall constitute a separate Class of revolving credit commitments from Existing Commitments of the Specified Existing Commitment Class and from any other Existing Commitments (together with any other Extended Commitments so established on such date).
(b) The Borrower shall provide the applicable Extension Request at least five (5) Business Days (or such shorter period as the Administrative Agent may determine in its reasonable discretion) prior to the date on which Lenders under the Existing Class are requested to respond, and shall agree to such procedures, if any, as may be established by, or acceptable to, the Administrative Agent, in each case acting reasonably, to accomplish the purpose of this Section 2.16. Any Lender (an Extending Lender) wishing to have all or a portion of its Commitments (or any earlier Extended Commitments) of an Existing Class subject to such Extension Request converted into
Extended Commitments shall notify the Administrative Agent (an Extension Election) on or prior to the date specified in such Extension Request of the amount of its Commitments (and/or any earlier Extended Commitments) which it has elected to convert into Extended Commitments (subject to any minimum denomination requirements imposed by the Administrative Agent). In the event that the aggregate amount of Commitments (and any earlier Extended Commitments) subject to Extension Elections exceeds the amount of Extended Commitments requested pursuant to the Extension Request, Commitments and (and any earlier Extended Commitments) subject to Extension Elections shall be converted to Extended Commitments on a pro rata basis based on the amount of Commitments (and any earlier Extended Commitments) included in each such Extension Election or as may be otherwise agreed to in the applicable Extension Amendment. Notwithstanding the conversion of any Existing Commitment into an Extended Commitment, such Extended Commitment shall be treated identically to all Existing Commitments of the Specified Existing Commitment Class for purposes of the obligations of a Lender in respect of Letters of Credit under Section 2.03 and Swing Line Loans under Section 2.04, except that the applicable Extension Amendment may provide that the Swing Line Maturity Date and/or the last day for issuing Letters of Credit and/or the Letter of Credit Expiration Date may be extended and the related obligations to make Swing Line Loans and issue Letters of Credit may be continued (pursuant to mechanics to be specified in the applicable Extension Amendment) so long as the applicable Swing Line Lender and/or the applicable L/C Issuer, as applicable, have consented to such extensions (it being understood that no consent of any other Lender shall be required in connection with any such extension). Any Lender that elects in its sole discretion not to become an Extending Lender shall cease to be a Lender hereunder and shall no longer have any Commitments, other obligations or rights (other than such Lenders rights to indemnification under the Loan Documents which shall continue to remain in effect after such time as set forth in this Agreement) hereunder, in each case as of the applicable Maturity Date, so long as each such Lender has received payment in full in respect of its Applicable Percentage of all outstanding Obligations that are then due and owing as of such applicable Maturity Date.
(c) Extended Commitments shall be established pursuant to an amendment (an Extension Amendment) to this Agreement (which, notwithstanding anything to the contrary set forth in Section 11.01, shall not require the consent of any Lender other than the Extending Lenders with respect to the Extended Commitments established thereby) executed by the Loan Parties, the Administrative Agent and the Extending Lenders. It is understood and agreed that each Lender hereunder has consented, and shall at the effective time thereof be deemed to consent to each amendment to this Agreement and the other Loan Documents authorized by this Section 2.16 and the arrangements described above in connection therewith. No Extension Amendment shall provide for any tranche of Extended Commitments in an aggregate principal amount that is less than $25.0 million. Notwithstanding anything to the contrary in this Section 2.16(c) and without limiting the generality or applicability of Section 11.01 to any Section 2.16 Additional Amendments (as defined below), any Extension Amendment may provide for additional terms and/or additional amendments other than those referred to or contemplated above (any such additional amendment, a Section 2.16 Additional Amendment) to this Agreement and the other Loan Documents; provided that such
Section 2.16 Additional Amendments are within the requirements of Section 2.16(a) and do not become effective prior to the time that such Section 2.16 Additional Amendments have been consented to (including, without limitation, pursuant to consents applicable to holders of any Extended Loans provided for in any Extension Amendment) by such of the Lenders, Loan Parties and other parties (if any) as may be required in order for such Section 2.16 Additional Amendments to become effective in accordance with Section 11.01.
(d) Notwithstanding anything to the contrary contained in this Agreement, (i) on any date on which any Class of Existing Commitments is converted to extend the related scheduled maturity date(s) in accordance with paragraph (a) above (an Extension Date), in the case of the Existing Commitments of each Extending Lender under any Specified Existing Commitment Class, the aggregate principal amount of such Existing Commitments shall be deemed reduced by an amount equal to the aggregate principal amount of Extended Commitments so converted by such Lender on such date, and such Extended Commitments shall be established as a separate Class of revolving credit commitments from the Specified Existing Commitment Class and from any other Existing Commitments (together with any other Extended Commitments so established on such date) and (ii) if, on any Extension Date, any Existing Loans of any Extending Lender are outstanding under the Specified Existing Commitment Class, such Existing Loans (and any related participations) shall be deemed to be allocated as Extended Loans (and related participations) in the same proportion as such Extending Lenders Specified Existing Commitments to Extended Commitments.
(e) No exchange of Loans or Commitments pursuant to any Extension Amendment in accordance with this Section 2.16 shall constitute a voluntary or mandatory payment or prepayment for purposes of this Agreement.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any obligation of any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Tax unless required by applicable Law, provided that if any Loan Party, the Administrative Agent or any other withholding agent shall be required by applicable Law to deduct any Indemnified Taxes (including any Other Taxes) from such payments, then (i) the sum payable by the Loan Party shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01) the Administrative Agent or any Lender (with the term Lender in this Section 3.01 being deemed to include an L/C Issuer), as the case may be, receives an amount equal to the sum it would have received had no such deductions been made, (ii) the applicable withholding agent shall make such deductions and (iii) the applicable withholding agent shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Law. For purposes of this Section 3.01, any payments by the
Administrative Agent to a Lender of any amounts received by the Administrative Agent from any Loan Party on behalf of such Lender shall be treated as a payment from the Loan Party to such Lender.
(b) Payment of Other Taxes by the Loan Parties. Without limiting the provisions of subsection (a) above, the Loan Parties shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Law.
(c) Reimbursement by the Lenders. To the extent that the Borrower for any reason fails to pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof), the Swing Line Lender, the L/C Issuers or any Related Party of any of the foregoing, each Lender (other than the Swing Line Lender in its capacity as such) severally agrees to pay to the Administrative Agent (or any such sub-agent), the Collateral Agent, the Swing Line Lender, the L/C Issuers or such Related Party, as the case may be, such Lenders Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the Collateral Agent, the Swing Line Lender or L/C Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or the Collateral Agent in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d).
(d) Indemnification by the Loan Parties. The Loan Parties shall, jointly and severally, indemnify the Administrative Agent and each Lender, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 3.01) paid by the Administrative Agent or such Lender, as the case may be, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(e) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the applicable Loan Party to a Governmental Authority, the applicable Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
(f) Status of Fee Recipients. Each Fee Recipient hereby represents that it is a Permitted Investor and agrees to update Internal Revenue Service Form W-9 (or its successor form) or applicable Internal Revenue Service Form W-8 (or its successor form)
upon any change in such Persons circumstances or if such form expires or becomes inaccurate or obsolete, and to promptly notify the Borrower and the Administrative Agent if such Person becomes legally ineligible to provide such form.
(g) Status of Foreign Lenders. To the extent it is legally entitled to do so, any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the applicable Loan Party is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Loan Parties (with a copy to the Administrative Agent), at the time or times prescribed by applicable Law or reasonably requested by the Loan Parties or the Administrative Agent, such properly completed and executed documentation prescribed by applicable Law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Loan Parties or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Loan Parties or the Administrative Agent as will enable the Loan Parties or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Each 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(g) or Section 3.01(h)) 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 the Administrative Agent that it is legally unable to do so.
Without limiting the generality of the foregoing, any Foreign Lender, to the extent it is legally entitled to do so, shall deliver to the Loan Parties and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Loan Parties or the Administrative Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:
(i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party,
(ii) duly completed copies of Internal Revenue Service Form W-8ECI,
(iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (A) a certificate substantially in the form of Exhibit M-1, Exhibit M-2, Exhibit M-3 or Exhibit M-4 (any such certificate, a U.S. Tax Compliance Certificate) and (B) duly completed copies of Internal Revenue Service Form W-8BEN,
(iv) to the extent a Foreign Lender is not the beneficial owner of any obligations of the Loan Parties hereunder (for example, where the Foreign Lender is a
partnership or participating Lender granting a typical participation), duly completed copies of Internal Revenue Service Form W-8IMY, accompanied by a Form W-8ECI, W-8BEN, U.S. Tax Compliance Certificate, Form W-9 or Form W-8IMY from each beneficial owner, as applicable, or
(v) two properly completed and duly signed original 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, U.S. federal withholding tax on any payments to such Lender under the Loan Documents.
(h) Status of Non-Foreign Lenders. Any Lender that is not a Foreign Lender shall deliver to the Loan Parties and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Loan Parties or the Administrative Agent), executed originals of Internal Revenue Service Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax.
(i) FATCA. If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Loan Parties and the Administrative Agent at the time or times prescribed by Law and at such time or times reasonably requested by the Loan Parties 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 Loan Parties or the Administrative Agent as may be necessary for the Loan Parties and the Administrative Agent to comply with their obligations under FATCA and to determine whether such Lender has complied with such Lenders obligations under FATCA or to determine the amount, if any, to deduct and withhold from such payment. Solely for purposes of this clause (i), FATCA shall include any amendments made to FATCA after the date of this Agreement.
(j) Treatment of Certain Refunds. If the Administrative Agent or any Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by the applicable Loan Party or with respect to which the applicable Loan Party has paid additional amounts pursuant to this Section 3.01, it shall pay to the Loan Parties an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Loan Parties under this Section 3.01 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses (including any Taxes) of the Administrative Agent or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the applicable Loan Party, upon the request of the Administrative Agent or such Lender, agree to repay the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender if the
Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Loan Parties or any other Person.
3.02 Illegality. If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund LIBO Rate Loans, or to determine or charge interest rates based upon the LIBO Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue LIBO Rate Loans or to convert Base Rate Loans to LIBO Rate Loans shall be suspended 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, the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all LIBO Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such LIBO Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such LIBO Rate Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
3.03 Inability to Determine Rates. If the Administrative Agent (in the case of clauses (a) or (b) below) or the Required Lenders (in the case of clause (c) below) determine that for any reason in connection with any request for a LIBO 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 LIBO Rate Loan, (b) adequate and reasonable means do not exist for determining the LIBO Rate for any requested Interest Period with respect to a proposed LIBO Rate Loan, or (c) the LIBO Rate for any requested Interest Period with respect to a proposed LIBO 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, the obligation of the Lenders to make or maintain LIBO Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders in the case of clause (c)) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of LIBO Rate Loans or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans in the amount specified therein.
3.04 Increased Costs.
(a) Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (with the term
Lender in this Section 3.04 being deemed to include an L/C Issuer) (except any reserve requirement contemplated by Section 3.04(e));
(ii) subject any Lender to any Taxes (other than (A) Indemnified Taxes covered in Section 3.01, or (B) Excluded Taxes) with respect to this Agreement, any Letter of Credit, any participation in a Letter of Credit or any Loan made by it; or
(iii) impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or LIBO Rate Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any LIBO Rate Loan (or of maintaining its obligation to make any such Loan), or to increase the cost to such Lender of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, 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.
(b) Capital Requirements. If any Lender 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, Letters of Credit issued by, or participations in Letters of Credit held by, such Lender, to a level below that which such Lender or such Lenders holding company 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 the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lenders holding company for any such reduction suffered.
(c) Certificates for Reimbursement. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company as specified in subsection (a) or (b) of this Section 3.04, in reasonable detail sufficient to allow the Borrower to verify such calculation, and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section 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 this Section 3.04 for any increased costs incurred or reductions suffered more than six months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lenders
intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof).
(e) Reserves on LIBO 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 LIBO 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.
3.05 Compensation for Losses. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, 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 Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);
(b) any failure by the Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate Loan on the date or in the amount notified by the Borrower; or
(c) any assignment of a LIBO Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 11.13;
including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained, but excluding loss of anticipated profits. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.
For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each LIBO Rate Loan made by it at the LIBO Rate for such Loan by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such LIBO Rate Loan was in fact so funded.
3.06 Mitigation Obligations; Replacement of Lenders.
(a) Designation of a Different Lending Office. If any Lender (with the term Lender in this Section 3.06 being deemed to include an L/C Issuer) requests
compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender is a Defaulting Lender, the Borrower may replace such Lender in accordance with Section 11.13.
3.07 Survival. All of the Borrowers obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.
ARTICLE IV
CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
4.01 Conditions of Initial Credit Extension. The obligation of each L/C Issuer and each Lender to make its initial Credit Extension hereunder on the Closing Date is subject to the prior or substantially concurrent satisfaction or waiver pursuant to Section 11.01 of the following conditions:
(a) The Administrative Agents receipt of the following, each in form and substance reasonably satisfactory to the Administrative Agent:
(i) executed counterparts of this Agreement and the Perfection Certificate by each of the parties thereto;
(ii) a Note executed by the Borrower in favor of each Lender requesting a Note;
(iii) the Security Agreement, the Pledge Agreement, the Intellectual Property Security Agreement and the Swedish Pledge Agreement, each duly executed by each Loan Party party thereto, together with:
(A) UCC financing statements in form satisfactory to the Administrative Agent for filing under the Uniform Commercial Code of all jurisdictions in which any Loan Party is organized,
(B) evidence that all other action that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under the Collateral Documents has been taken (including receipt of duly executed payoff letters, and UCC-3 termination statements); and
(C) evidence that all action required to perfect the Collateral Agents security interest in the Intellectual Property of the Loan Parties that own Intellectual Property registered in the United States Patent & Trademark Office or the United States Copyright Office has been or will be taken;
(iv) such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party;
(v) good standing or active status certificates, as applicable, of each Loan Party in its jurisdiction of organization and, to the extent reasonably requested by the Administrative Agent, bring-down good standing or active status certificates, as applicable;
(vi) an opinion (A) of Latham & Watkins LLP, counsel to the Loan Parties, and (B) Swedish counsel to the Loan Parties, each in form and substance reasonably satisfactory to the Administrative Agent;
(vii) a certificate signed by a Responsible Officer of the Borrower certifying that the conditions specified in Sections 4.02(a) and (b) have been satisfied;
(viii) a certificate signed by a Responsible Officer of the Borrower certifying that, after giving effect to the Transaction, the Loan Parties on a Consolidated basis are Solvent;
(ix) certificates of insurance naming the Collateral Agent, on behalf of the Lenders, as an additional insured or loss payee, as the case may be, under all insurance policies maintained with respect to the assets and properties of the Loan Parties that constitute Collateral as may be requested by the Administrative Agent;
(x) a certified copy of the Term Loan Credit Agreement, duly executed by the parties thereto;
(xi) (A) appraisals by a third party appraiser acceptable to the Collateral Agent of all Inventory of the Loan Parties, the results of which are satisfactory to the Collateral Agent, and (B) a written report regarding the results of a collateral field examination of the Loan Parties, which shall be satisfactory to the Collateral Agent. The Administrative Agent acknowledges that the condition set forth in this clause (xi) is deemed satisfied by the Administrative Agents receipt of such deliverables under the Existing Credit Agreement;
(xii) executed counterparts of the Intercreditor Agreement from each of the parties thereto;
(xiii) results of searches or other evidence reasonably satisfactory to the Collateral Agent (in each case dated as of a date reasonably satisfactory to the Collateral Agent) indicating the absence of Liens on the assets of the Loan Parties, except for Permitted Liens and Liens for which termination statements and releases or subordination agreements are being tendered on the Closing Date;
(xiv) a certificate signed by a Responsible Officer of the Borrower certifying that attached to such certificate is a true, correct and complete copy of the Management Agreement, including all amendments thereto; and
(xv) such other certificates, documents, consents or opinion as the Administrative Agent may reasonably require.
(b) The Administrative Agent shall have received a Borrowing Base Certificate prepared as of a date not earlier than the last Business Day of February, 2012 and executed by a Responsible Officer of the Borrower.
(c) The Certificate representing the Pledged Equity referred to in the Swedish Pledge Agreement accompanied by an undated stock power executed in blank or endorsement has, to the extent not previously delivered, been delivered to the agent under the Term Loan Documents.
(d) The Closing Date shall have occurred on or before May 15, 2012.
(e) The Borrower shall have entered into the Term Facility and the terms of and the documentation evidencing the Term Facility shall be consistent with the term sheet therefor previously furnished to the Administrative Agent.
(f) The Lenders shall have received, to the extent requested, all documentation and other information required by regulatory authorities under applicable know your customer and anti-money laundering rules and regulations, including the USA PATRIOT Act.
(g) The Administrative Agent shall have received evidence that each of the Existing Credit Agreement, the Existing Term Loan Facility and the Mezzanine Facility has been or concurrently with entry into this Agreement on such date is being terminated and all Liens securing obligations under the Existing Credit Agreement and the Existing Term Loan Facility have been or concurrently with entry into this Agreement on such date are being released.
Without limiting the generality of the provisions of Section 9.07, 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.
4.02 Conditions to All Credit Extensions. The obligation of each Lender to honor any Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type, or a continuation of LIBO Rate Loans) is subject to the following conditions precedent:
(a) The representations and warranties of the Borrower and each other Loan Party contained in this Agreement and the other Loan Documents shall be true and correct on and as of the date of such Credit Extension, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date.
(b) No Default shall exist, or would result from such proposed Credit Extension or from the application of the proceeds thereof.
(c) The Administrative Agent and, if applicable, each L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.
Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion of Committed Loans to the other Type or a continuation of LIBO Rate Loans) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Each of the Loan Parties represents and warrants to the Administrative Agent and the Lenders that:
5.01 Existence, Qualification and Power. Each Loan Party and each of its Restricted Subsidiaries (a) is duly organized or formed, validly existing and, as applicable, in good standing or of active status under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, permits, authorizations, consents and approvals to (i) own or lease its assets and carry on its business as currently conducted or proposed to be conducted, and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good standing or of active status under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Schedule 5.01 annexed hereto sets forth, as of the Closing Date, each Loan Partys name as it appears in official filings in its state of incorporation or organization, its state of incorporation or organization, organization type, organization number, if
any, issued by its state of incorporation or organization and its Federal employer identification number.
5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is or is to be a party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Persons Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of (or the requirement to create) any Lien under, or require any payment to be made under (i) any Contractual Obligation or Material Indebtedness to which such Person is a party or affecting such Person or the properties of such Person or any of the Restricted Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any applicable Law, except in the case of clause (b) or (c), to the extent that such conflict, breach, contravention or violation could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document or the Term Loan Documents, except for (a) filings necessary to perfect the Liens on the Collateral granted by the Loan Parties pursuant to the Collateral Documents, (b) the approvals, consents, exemptions, authorizations, actions, notices and filings that have been duly obtained, taken, given or made and are in full force and effect and (c) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make would not reasonable be expected to have, individually or in the aggregate, a Material Adverse Effect.
5.04 Binding Effect. This Agreement and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto. This Agreement and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
5.05 Financial Statements; No Material Adverse Effect.
(a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein and (ii) fairly present in all material respects the financial condition of the Borrower and the Restricted Subsidiaries as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein.
(b) Since February 27, 2011, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.
(c) The Consolidated forecasted balance sheet, statements of income and cash flows of Holdings and its Subsidiaries delivered pursuant to Section 4.01 or Section 6.01, when taken as a whole, were prepared in good faith on the basis of the assumptions stated therein, which assumptions were reasonable in light of the conditions existing at the time of delivery of such forecasts, and represented, at the time of delivery, a reasonable estimate of the Borrowers and its Subsidiaries future financial condition and performance (it being understood that (i) no forecasts are to be viewed as facts, (ii) any forecasts are subject to significant uncertainties and contingencies, (iii) no assurance can be given that any particular forecasts will be realized and (iv) actual results may differ and such differences may be material).
5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties threatened at law, in equity, in arbitration or before any Governmental Authority, by or against Holdings or any of its Restricted Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or (b) would reasonably be expected to have a Material Adverse Effect.
5.07 [reserved]
5.08 Ownership of Property; Liens; Investments.
(a) Each Loan Party and each of the Restricted Subsidiaries has good record, marketable and insurable title in fee simple to all owned Real Estate necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Loan Party and each of the Restricted Subsidiaries has good record and marketable title to, or valid leasehold interests in, all personal property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. No Mortgage encumbers improved owned Real Estate that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards within the meaning of the National Flood Insurance Act of 1968 unless flood insurance has been obtained in accordance with Section 6.07(b).
(b) The properties and assets of each Loan Party and each of the Restricted Subsidiaries are subject to no Liens, other than (i) with respect to Mortgaged Property, Permitted Encumbrances and (ii) with respect to all other properties and assets, Permitted Liens.
(c) Schedule 5.08(c) sets forth a complete and accurate list as of the Closing Date of all Real Estate owned by each Loan Party and each of the Restricted Subsidiaries
showing the street address, county or other relevant jurisdiction, state, record owner and book and estimated fair value thereof.
(d) (i) Schedule 5.08(d)(i) sets forth a complete and accurate list of all Leases under which any Loan Party is the lessee as of the Closing Date showing the street address, county or other relevant jurisdiction, state, lessor, lessee and expiration date.
(ii) Schedule 5.08(d)(ii) sets forth a complete and accurate list of all leases of Real Estate under which any Loan Party is the lessor as of the Closing Date showing the street address, county or other relevant jurisdiction, state, lessor, lessee, expiration date and annual rental cost thereof.
(e) Schedule 5.08(e) sets forth a complete and accurate list of all Investments held by any Loan Party or any Restricted Subsidiary of a Loan Party on the date hereof, showing as of the date hereof the amount, obligor or issuer and maturity, if any, thereof.
5.09 Environmental Matters.
(a) Neither any Loan Party nor any Restricted Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any Environmental Permit, (ii) has become subject to any Environmental Liability, (iii)) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability, except, in each case, as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Except as would not reasonably be expected to result in a Material Adverse Effect, (i) none of the properties currently or, to the knowledge of the Loan Parties, formerly owned, leased, or operated by any Loan Party or any Restricted Subsidiary is listed or, to the knowledge of the Loan Parties, proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or is adjacent to any such property; (ii) none of the properties to which any Loan Party or any Restricted Subsidiary has, directly or indirectly, transported or arranged for the transportation of any Hazardous Materials, is listed or, to the knowledge of the Loan Parties, proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list; (iii) there are no and, to the knowledge of the Loan Parties, never have been any underground or above-ground storage tanks or any surface impoundments, septic tanks, pits, sumps or lagoons in which Hazardous Materials are being or have been treated, stored or disposed on any property currently owned, leased, or operated by any Loan Party or any Restricted Subsidiary or, to the knowledge of the Loan Parties, on any property formerly owned, leased, or operated by any Loan Party or any Restricted Subsidiary; (iv) there is no asbestos or asbestos-containing material on any property currently owned or operated by any Loan Party or any Restricted Subsidiary; and (v) Hazardous Materials have not been Released, discharged, or disposed of on any property currently or, to the knowledge of the Loan Parties, formerly owned, leased, or operated by any Loan Party or any Restricted Subsidiary.
(c) (i) Neither any Loan Party nor any Restricted Subsidiary is undertaking, and has not completed, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened Release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law, except as would not reasonably be expected to result in a Material Adverse Effect; and (ii) all Hazardous Materials generated, used, treated, handled, stored, or transported by, or on behalf of, any Loan Party or any Restricted Subsidiary have been disposed of in a manner which would not reasonably expected to result in a Material Adverse Effect.
5.10 Insurance. Schedule 5.10 sets forth a description of all insurance maintained by or on behalf of the Loan Parties as of the Closing Date. As of the Closing Date, each insurance policy listed on Schedule 5.10 is in full force and effect and all premiums in respect thereof that are due and payable have been paid.
5.11 Taxes. The Loan Parties and their Restricted Subsidiaries have filed all material Tax returns and reports required to be filed, and have paid all Taxes levied or imposed upon them or their properties, income or assets otherwise due and payable and have satisfied all of their Tax withholding obligations, except (a) Taxes which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP and which contest effectively suspends the collection of the contested obligation and the enforcement of any Lien securing such obligation and (b) any Tax return, report or Taxes, the failure to file or to pay, as the case may be, would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect. There is no proposed Tax deficiency or assessment known to any Loan Party against the Loan Party or any Subsidiary that would, if made, individually or in the aggregate, have a Material Adverse Effect. Except as could not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect, each Loan Party and each of its Subsidiaries has made adequate provisions in accordance with GAAP for all Taxes not yet due and payable.
5.12 ERISA Compliance.
(a) Except as could not reasonably be expected to result in a Material Adverse Effect, (i) each Plan is in compliance with its terms and the applicable provisions of ERISA and the Code, (ii) each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of the Borrower, nothing has occurred which could reasonably be expected to prevent, or cause the loss of, such qualification, and (iii) Holdings, the Borrower and each ERISA Affiliate have made all required contributions to each Pension Plan, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Pension Plan.
(b) There are no pending or, to the knowledge of the Loan Parties, threatened claims (other than claims for benefits in the normal course), actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect. There has been no nonexempt prohibited transaction (as defined in Section 406 of ERISA and Section 4975 of the Code) or violation of the fiduciary responsibility rules by Holdings or the Borrower with respect to any Plan that, individually or in the aggregate, has resulted or could reasonably be expected to result in a Material Adverse Effect.
(c) Except as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect: (i) no ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability as of the most recent valuation date for such Pension Plan; (iii) none of Holdings, the Borrower or any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) none of Holdings, the Borrower or any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) none of Holdings, the Borrower or any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
(d) Except as would not reasonably be expected to result in a Material Adverse Effect: (i) each Foreign Plan has been maintained in compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities, (ii) none of Holdings, the Borrower or any Restricted Subsidiary have incurred any obligation in connection with the termination of or withdrawal from any Foreign Plan, and (iii) the present value of the accrued benefit liabilities (whether or not vested) under each Foreign Plan which is funded, determined as of the end of the most recently ended Fiscal Year of Holdings, the Borrower or any Restricted Subsidiary (based on the actuarial assumptions used for purposes of the applicable jurisdictions financial reporting requirements), did not exceed the current value of the assets of such Foreign Plan (and for each Foreign Plan which is not funded, the obligations of such Foreign Plan are properly accrued).
5.13 Subsidiaries; Equity Interests; Loan Parties. As of the Closing Date, no Loan Party has any Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and non-assessable and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except those created under the Collateral Documents and the Term Loan Documents and the Swedish Credit Facility and any nonconsensual Lien that is permitted under Section 7.01. As of the Closing Date no Loan Party has any equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13.
5.14 Margin Regulations; Investment Company Act.
(a) None of the proceeds of the Loans shall be used in any manner that would result in a violation of Regulations T, U or X of the FRB.
(b) None of the Loan Parties or any Restricted Subsidiary is or is required to be registered as an investment company under the Investment Company Act of 1940.
5.15 Disclosure. No written report, financial statement, certificate or other information (including the Information Memorandum) furnished by or on behalf of the Loan Parties to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case as modified or supplemented by other information so furnished), taken as a whole, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information, the Loan Parties represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.
5.16 Compliance with Laws. Each Loan Party and each Restricted Subsidiary thereof is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
5.17 Intellectual Property; Licenses, Etc. Each Loan Party and each of its Restricted Subsidiaries own, or possess the right to use, all of the Intellectual Property that are reasonably necessary for the operation of their respective businesses, except as would not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, and Schedule 5.17 sets forth a complete and accurate list of all such Intellectual Property owned by each Loan Party and each of its Restricted Subsidiaries which are registered with the United States Patent and Trademark Office and United States Copyright Office. To the knowledge of the Borrower, no slogan or other advertising or other material or patent, trademark or copyright now employed by any Loan Party or any of its Restricted Subsidiaries infringes upon any Intellectual Property right held by any other Person, except to the extent that any such infringement could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 5.17, no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Loan Parties, threatened, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
5.18 Solvency. On a Consolidated basis, after giving effect to the Transaction, the Loan Parties are Solvent.
5.19 Casualty, Etc. Neither the businesses nor the properties of any Loan Party or any of the Restricted Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
5.20 Labor Matters. There are no strikes, lockouts, slowdowns or other material labor disputes against any Loan Party pending or, to the knowledge of any Loan Party, threatened that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower and Holdings, (a) the hours worked by and payments made to employees of the Loan Parties comply in all material respects with the Fair Labor Standards Act and any other applicable Federal, state, local or foreign Law dealing with such matters, (b) no Loan Party has incurred any material liability or obligation under the Worker Adjustment and Retraining Act or similar state Law and (c) all payments due from any Loan Party, or for which any claim may be made against any Loan Party, on account of wages and employee health and welfare insurance and other benefits, have been paid or properly accrued in all material respects in accordance with GAAP as a liability on the books of such Loan Party. There are no representation proceedings pending or, to any Loan Partys knowledge, threatened to be filed with the National Labor Relations Board, and no labor organization or group of employees of any Loan Party has made a pending demand for recognition except those that could not reasonably be expected to have a Material Adverse Effect. There are no complaints, unfair labor practice charges, grievances, arbitrations, unfair employment practices charges or any other claims or complaints against any Loan Party pending or, to the knowledge of any Loan Party, threatened to be filed with any Governmental Authority or arbitrator based on, arising out of, in connection with, or otherwise relating to the employment or termination of employment of any employee of any Loan Party except those that could not reasonably be expected to have a Material Adverse Effect.
5.21 Collateral Documents. The provisions of the Collateral Documents are effective to create in favor of the Collateral Agent for the benefit of the Credit Parties a legal, valid and enforceable First Priority Lien or Second Priority Lien, as applicable (subject to Permitted Liens), on all right, title and interest of the respective Loan Parties in the Collateral described therein, and (a) when all appropriate filings or recordings are made in the appropriate offices as may be required under applicable law and (b) upon the taking of possession or control by the Collateral Agent of such Collateral with respect to which a security interest may be perfected only by possession or control (which possession or control shall be given to the Collateral Agent to the extent required by any Collateral Document), such Collateral Document will constitute fully perfected Liens on, and security interests in, all right, title and interest of the Loan Parties in such Collateral. Prior to the satisfaction of the Discharge of Term Obligations, the representations made in this Section 5.21 with respect to possession or control of any Collateral on which there is a Second Priority Lien by the Collateral Agent shall be deemed to refer to the possession or control of such Collateral by the collateral agent for the Term Facility (holding for the benefit of the Collateral Agent for the Credit Parties).
5.22 USA PATRIOT Act. To the extent applicable, each of Holdings and its Restricted Subsidiaries is in compliance, in all material respects, with (a) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States
Treasury Department (31 CFR Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto and (b) the USA PATRIOT Act. No part of the proceeds of the Loans will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than (a) any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement and (b) Obligations under Other Liabilities), the Borrower shall, and shall (except in the cases of the covenants set forth in Sections 6.01, 6.02 and 6.03) cause each Restricted Subsidiary to:
6.01 Financial Statements and Other Reports. Deliver to the Administrative Agent, in form and detail reasonably acceptable to the Administrative Agent:
(a) as soon as available, but in any event within 105 days after the end of each Fiscal Year of Holdings, a Consolidated balance sheet of Holdings and its Subsidiaries as at the end of such Fiscal Year, and the related Consolidated statements of income or operations, shareholders equity (if available) and cash flows for such Fiscal Year setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of Ernst & Young LLP or another Registered Public Accounting Firm of nationally recognized standing reasonably satisfactory to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any going concern or like qualification or exception or any qualification or exception as to the scope of such audit;
(b) as soon as available, but in any event within 50 days after the end of each of the first three Fiscal Quarters of each Fiscal Year of Holdings (commencing with the Fiscal Quarter ending May 26, 2012) a Consolidated balance sheet of Holdings and its Subsidiaries as at the end of such Fiscal Quarter, and the related Consolidated statements of income or operations and cash flows for such Fiscal Quarter and for the portion of Holdings Fiscal Year then ended, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year and to the figures as set forth in the projections delivered pursuant to Section 6.01(d), all in reasonable detail, certified by a Responsible Officer on behalf of Holdings as fairly presenting in all material respects the financial condition, results of operations, shareholders equity and cash flows of Holdings and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments, including, but not limited to, purchase accounting adjustments, and the absence of footnotes;
(c) during any Monthly Financial Statement Delivery Period, as soon as available, but in any event within 40 days after the end of each of the Fiscal Months of each Fiscal Year of Holdings (commencing with the first full Fiscal Month ended after the Closing Date) (and except with respect to (i) the last Fiscal Month of each Fiscal Quarter of Holdings, with respect to which the applicable period for delivery shall be 50 days rather than 40 days, and (ii) the last Fiscal Month of each Fiscal Year of Holdings, with respect to which the applicable period for delivery shall be 105 days rather than 40 days, and (iii) the first Fiscal Month of each Fiscal Year of Holdings, with respect to which the applicable period for delivery shall be 70 days rather than 40 days), a Consolidated balance sheet of Holdings and its Subsidiaries as of the end of such Fiscal Month, and the related Consolidated statements of income or operations and cash flows for such Fiscal Month and for the portion of Holdings Fiscal Year then ended, setting forth in each case in comparative form for the corresponding month of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, and to the figures as set forth in the projections delivered pursuant to Section 6.01(d), all in reasonable detail and duly certified by a Responsible Officer on behalf of Holdings as fairly presenting in all material respects the financial condition, results of operations, shareholders equity, and cash flows of Holdings and its Subsidiaries in accordance with GAAP, subject only to normal year-end and quarterly adjustments and the absence of footnotes. Upon the commencement of any Monthly Financial Statement Delivery Period, the Borrower shall deliver to the Administrative Agent, within five (5) days following the first day of such Monthly Financial Statement Delivery Period, the foregoing financial statements for the most recently ended Fiscal Month for which financial statements would have been due prior to such date had the last day of such Fiscal Month occurred during a Monthly Financial Statement Delivery Period.
(d) as soon as available, but in any event no later than 60 days after the end of each Fiscal Year of Holdings commencing at the end of the Fiscal Year ending February 23, 2013, an annual budget of Holdings and its Subsidiaries on a Consolidated basis for the immediately following Fiscal Year, prepared by management of the Loan Parties for its internal use consistent with the annual budget and related financial statements delivered by the Borrower under the Existing Credit Agreement or as otherwise reasonably acceptable to the Administrative Agent; and
(e) simultaneously with the delivery of each set of financial statements referred to in (i) Section 6.01(a), Section 6.01(b) and Section 6.01(c) above, the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries and variable interest entities (if any) from such financial statements and (ii) Section 6.01(a) and Section 6.01(b) above, a management narrative report providing reasonable detail on the financial results of Holdings for the period covered by such financial statements compared to the corresponding prior year period and the key factors (as determined in good faith by the Borrower) causing such changes.
6.02 Certificates; Other Information. Deliver to the Administrative Agent, in form and detail reasonably satisfactory to the Administrative Agent:
(a) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the financial statements for the period ending May 26, 2012), (i) a duly completed Compliance Certificate signed by a Responsible Officer of Holdings (to be furnished even if a Covenant Compliance Event is not then in effect), such Compliance Certificate to reflect the Consolidated Fixed Charge Coverage Ratio (determined for purposes of Section 7.15) on a trailing four quarter basis, as of the most recent Fiscal Quarter end for which financial statements are available or were required to be delivered under Section 6.01(a) or Section 6.01(b), and (ii) notice of any change in the location of any office in which a Loan Party maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility);
(b) within five (5) Business Days after the occurrence of a Covenant Compliance Event, and, in any event, concurrently with the delivery of the financial statements referred to in Section 6.01(c), a duly completed Compliance Certificate signed by a Responsible Officer of Holdings, such Compliance Certificate to reflect Consolidated Fixed Charge Coverage Ratio (determined for purposes of Section 7.15) on a trailing four quarter basis, as of the most recent Fiscal Quarter end for which financial statements are available or were required to be delivered under Section 6.01(c).
(c) on the 20th day of each Fiscal Month, a certificate in the form of Exhibit I (a Borrowing Base Certificate) showing the Borrowing Base as of the close of business on the last Business Day of the immediately preceding Fiscal Month, each Borrowing Base Certificate to be certified as complete and correct in all material respects on behalf of the Borrower by a Responsible Officer of the Borrower, provided that if an Availability Triggering Event occurs, such Borrowing Base Certificate, at the Administrative Agents sole discretion, shall be furnished on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day);
(d) promptly after the same are publicly available, copies of all annual, regular, periodic and special reports and registration statements which Holdings or the Borrower may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, or with any national securities exchange, and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;
(e) not later than seven (7) Business Days after receipt thereof by any Loan Party or any Restricted Subsidiary thereof, copies of all notices, requests and other documents (including amendments, waivers and other modifications) so received under or pursuant to any Term Loan Document or instrument, indenture, loan or credit or similar agreement regarding or related to any breach or default by any party thereto or any other event that, in each case, could have a Material Adverse Effect;
(f) promptly after any Loan Party has knowledge thereof, written notice of (i) any action or proceeding relating to any Environmental Law pending or threatened against any Loan Party or any of its Subsidiaries, (ii) any noncompliance with any Environmental Law by any Loan Party or any of its Subsidiaries, (iii) the existence of any Environmental Liability, or (iv) the existence of any Release of Hazardous Materials at
any property currently or formerly owned, leased or operated by any Loan Party or any of its Subsidiaries, which action, proceeding, non-compliance, Environmental Liability or Release could (x) reasonably be expected to have a Material Adverse Effect, or (y) cause any property described in the Mortgages to be subject to any material restrictions on ownership, occupancy, use or transferability under any Environmental Law;
(g) as soon as available, but in any event within thirty (30) days after the end of each Fiscal Year of the Borrower, to the extent that it would reflect information not previously delivered to the Administrative Agent, (i) a report supplementing Schedules 5.08(c), 5.08(d)(i) and 5.08(d)(ii), including an identification of all owned real property disposed of by any Loan Party or any Subsidiary thereof and all leased real property disposed of by any Loan Party or any Domestic Subsidiary during such Fiscal Year, a list and description (including the street address, county or other relevant jurisdiction, state, record owner, book value thereof and, in the case of leases of property, lessor, lessee, expiration date and annual rental cost thereof) of all Real Estate acquired or leased during such Fiscal Year and a description of such other changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete; (ii) a report supplementing Schedules 5.08(e) and 5.13 containing a description of all changes in the information included in such Schedules as may be necessary for such Schedules to be accurate and complete, each such report to be signed by a Responsible Officer of Holdings and to be in a form reasonably satisfactory to the Administrative Agent and (iii) a duly completed Perfection Certificate Supplement;
(h) at least five (5) Business Days prior written notice (or such shorter period as to which the Administrative Agent in its sole discretion agrees) of any change in: (i) any Loan Partys name (ii) any Loan Partys organizational structure or jurisdiction of incorporation or formation; or (iii) any Loan Partys Federal Taxpayer Identification Number or organizational identification number assigned to it by its state of organization;
(i) promptly after the request by any Lender, all documentation and other information that such Lender reasonably 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;
(j) upon request by the Administrative Agent, copies of: (i) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan; (ii) the most recent actuarial valuation report for each Pension Plan; and (iii) all notices received by any ERISA Affiliate from a Multiemployer Plan sponsor or any governmental agency concerning an ERISA Event; and
(k) promptly, such additional information regarding the business, financial, legal or corporate affairs of any Loan Party or any Restricted Subsidiary thereof, or compliance with the terms of the Loan Documents, as the Administrative Agent may from time to time reasonably request.
Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrowers website on the Internet at the website address listed on Schedule 11.02; or (ii)) on which such documents are posted on the Borrowers behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that: (A) upon request, the Borrower shall deliver paper copies of such documents to the Administrative Agent, and (B) the Borrower shall notify the Administrative Agent (by telecopier or electronic mail) 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. The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.
The Borrower hereby acknowledges that (1) the Administrative Agent and/or the Arrangers will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, Borrower Materials) by posting the Borrower Materials on IntraLinks or another similar electronic system (the Platform) and (2) certain of the Lenders may be public-side Lenders (i.e., Lenders that do not wish to receive material nonpublic information with respect to the Borrower or its securities) (each, a Public Lender). The Borrower hereby agrees that at any time that the Borrower is the issuer of any outstanding debt or equity securities that are registered or issued pursuant to a private offering or is actively contemplating issuing any such securities it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all such Borrower Materials 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 deemed to have authorized the Administrative Agent, the Arrangers and the Lenders to treat such Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 11.07); (y) all Borrower Materials marked PUBLIC are permitted to be made available through a portion of the Platform designated Public Investor; and (z) the Administrative Agent and the Arrangers shall be entitled to treat any Borrower Materials that are not marked PUBLIC as being suitable only for posting on a portion of the Platform not designated Public Investor.
6.03 Notices. Promptly, after knowledge thereof by a Responsible Officer, notify the Administrative Agent:
(a) of the occurrence of any Default;
(b) of any matter that has resulted or would reasonably be expected to result in a Material Adverse Effect, including as a result of (i) breach or non-performance of, or
any default under, a Contractual Obligation of any Loan Party or any Restricted Subsidiary thereof; (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary thereof and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Restricted Subsidiary thereof, including pursuant to any applicable Environmental Laws;
(c) of the occurrence of any ERISA Event that would reasonably be expected to result in a Material Adverse Effect;
(d) of any material change in accounting policies or financial reporting practices by any Loan Party or any Restricted Subsidiary thereof;
(e) of (i) any casualty or other insured damage to any portion of the Collateral or (ii) the commencement of any action or proceeding for the taking of any interest in a portion of the Collateral under power of eminent domain or (iii) any condemnation or similar proceeding or if any portion of the Collateral is damaged or destroyed; provided, however, that with respect to each of clauses (i), (ii) and (iii), the amount of Collateral affected thereby shall have an aggregate fair market value in excess of (A) $15.0 million, in the case of Term Priority Collateral or (B) $5.0 million, in the case of ABL Priority Collateral;
(f) of any change in Holdings or the Borrowers chief executive officer or chief financial officer; and
(g) any termination, withdrawal or resignation of Holdings or the Borrowers Registered Public Accounting Firm.
Each notice pursuant to Section 6.03(a) shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.
6.04 Payment of Obligations. Pay and discharge as the same shall become due and payable (a) all Taxes upon it or its properties or assets in all respects, unless the same are being contested in good faith by appropriate proceedings diligently conducted, adequate reserves in accordance with GAAP are being maintained by such Loan Party or such Restricted Subsidiary and such contest effectively suspends the collection of the contested obligation and the enforcement of any Lien securing such obligation; except for Taxes that could not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect; and (b) all material lawful claims which, if unpaid, would by law become a Lien upon its property (except as set forth in clause (a) above).
6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization, except for (i) transactions permitted by Section 7.04 or 7.05 and (ii) with respect to the maintenance of good standing status of any Loan Party, it will not be a breach of clause (a) of this Section 6.05 unless the failure to maintain good standing of such Loan Party could reasonably be expected to have a Material Adverse Effect; (b) take all reasonable action to
maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation or non-renewal of which could reasonably be expected to have a Material Adverse Effect.
6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear, casualty or condemnation excepted; and (b) make all necessary repairs thereto and renewals and replacements thereof except, in each case, where the failure to do so could not reasonably be expected to have a Material Adverse Effect.
6.07 Maintenance of Insurance.
(a) Maintain with financially sound and reputable insurance companies not Affiliates of the Loan Parties, insurance with respect to its properties and business against loss or damage (i) of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons or (ii) substantially similar to insurance maintained by the Borrower and its Restricted Subsidiaries on the Closing Date, in each case, subject to such changes as the Borrower may reasonably deem appropriate in its business judgment with respect to deductibles, self-insured amounts, coverage exclusions and maximum covered losses (provided that none of such policies shall include a co-insurance clause), and with respect to policies for Holdings and the Domestic Subsidiaries providing for not less than 30 days prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance.
(b) With respect to each improved Real Estate subject to a Mortgage, obtain flood insurance with coverages and in amounts sufficient to comply with the Flood Insurance Laws and, in any event, in an amount not less than $5.0 million for Zone A special flood hazard areas and $10.0 million for all other special flood hazard areas, in each case, as set forth on any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), otherwise comply with all applicable rules and regulations promulgated pursuant to the Flood Insurance Laws and deliver to the Administrative Agent evidence of such compliance in form and substance reasonably acceptable to the Administrative Agent.
(c) Fire and extended coverage policies maintained with respect to any Collateral shall be endorsed or otherwise amended to include (i) a mortgage clause (regarding improvements to Real Estate) and lenders loss payable clause (regarding personal property), in form and substance satisfactory to the Collateral Agent, which endorsements or amendments shall provide that the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Collateral Agent, and (ii) such other provisions as the Collateral Agent may reasonably require from time to time to protect the interests of the Credit Parties. Commercial general liability policies shall be endorsed to name the Collateral Agent as an additional insured. Business interruption policies with respect to Holdings and the Domestic Subsidiaries shall name
the Collateral Agent as a loss payee and shall be endorsed or amended to include (A) a provision that, from and after the Closing Date, the insurer shall pay all proceeds otherwise payable to the Loan Parties under the policies directly to the Collateral Agent, and (B) such other provisions as the Collateral Agent may reasonably require from time to time to protect the interests of the Credit Parties. Each such policy referred to in this Section 6.07 shall also provide that it shall not be canceled or not renewed (1) by reason of nonpayment of premium except upon not less than ten (10) days prior written notice thereof by the insurer to the Collateral Agent (giving the Collateral Agent the right to cure defaults in the payment of premiums) or (2) for any other reason except upon not less than thirty (30) days prior written notice thereof by the insurer to the Collateral Agent. The Borrower shall deliver to the Collateral Agent, prior to the cancellation, modification adverse to the Lenders, or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Collateral Agent, including an insurance binder) together with evidence satisfactory to the Collateral Agent of payment of the premium therefor.
(d) In the event that any part of the Collateral (other than, as long as the Term Facility is outstanding, Term Priority Collateral) is damaged by fire or other casualty and the insurance proceeds for such damage are greater than $5.0 million in any Fiscal Year, whether or not a Cash Dominion Event then exists, such proceeds, in their entirety, shall be delivered to the Administrative Agent and the Administrative Agent shall promptly apply such proceeds to reduce the Borrowers outstanding Credit Extensions in accordance with Sections 2.05(e) or 8.03, as applicable. In the event any part of the Collateral (other than, as long as the Term Facility is outstanding, Term Priority Collateral) is damaged by fire or other casualty and the insurance proceeds for such damage are less than $5.0 million in any Fiscal Year, such proceeds, in their entirety, shall be delivered to the Borrower, unless a Cash Dominion Event is then occurring, in which event such proceeds shall be delivered to the Administrative Agent and the Administrative Agent shall promptly apply such proceeds to reduce the Borrowers outstanding balance of Credit Extensions in accordance with Sections 2.05(e) or 8.03, as applicable.
(e) None of the Credit Parties, or their agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 6.07. Each Loan Party shall look solely to its insurance companies or any other parties other than the Credit Parties for the recovery of such loss or damage and such insurance companies shall have no rights of subrogation against any Credit Party or its agents or employees. If, however, the insurance policies do not provide waiver of subrogation rights against such parties, as required above, then the Loan Parties hereby agree, to the extent permitted by law, to waive their right of recovery, if any, against the Credit Parties and their agents and employees. The designation of any form, type or amount of insurance coverage by any Credit Party under this Section 6.07 shall in no event be deemed a representation, warranty or advice by such Credit Party that such insurance is adequate for the purposes of the business of the Loan Parties or the protection of their properties.
6.08 Compliance with Laws. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been set aside and maintained by the Loan Parties in accordance with GAAP; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.
6.09 Books and Records. Maintain proper books of record and account, in which entries in conformity in all material respects with GAAP under U.S. law, with respect to Holdings and its Domestic Subsidiaries, and under applicable foreign law, with respect to Foreign Subsidiaries (provided that nothing in this Section 6.09 shall affect the obligation of Holdings to provide financial statements in accordance with GAAP under Section 6.01), consistently applied shall be made of all financial transactions and matters involving the assets and business of the Loan Parties and their Restricted Subsidiaries, as the case may be.
6.10 Inspection Rights.
(a) Permit representatives and independent contractors of the Administrative Agent (accompanied by any Lender (with the consent of the Borrower (not to be unreasonably withheld)) to visit and inspect any of its properties, to examine its corporate, financial, insurance, 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 such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that unless an Event of Default has occurred and is continuing, the Administrative Agent may make only one such visit in any Fiscal Year 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 to the extent practicable.
(b) Upon the request of the Administrative Agent after reasonable prior notice, permit the Administrative Agent or professionals (including investment bankers, consultants, accountants, lawyers and appraisers) retained by the Administrative Agent to conduct appraisals, collateral field examinations and other evaluations, including, without limitation, of (i) the Borrowers practices in the computation of the Borrowing Base, and (ii) the assets included in the Borrowing Base and related financial information such as, but not limited to, sales, gross margins, payables, accruals and reserves. Subject to the following sentences, the Loan Parties shall pay the fees and expenses of the Administrative Agent or such professionals with respect to such evaluations and appraisals. Without limiting the foregoing, the Loan Parties acknowledge that the Administrative Agent may undertake up to two (2) inventory appraisals and two (2) collateral field examinations each eighteen (18) month period, at the Loan Parties expense, provided that, from and after the first anniversary of the Closing Date, as long as average monthly Excess Availability is greater than 40% of the then Borrowing Base
then in effect and no Event of Default exists, the Administrative Agent may conduct no more than one collateral field examination and one inventory appraisal in any twelve month period at the Loan Parties expense). Notwithstanding the foregoing, the Administrative Agent may cause additional appraisals and collateral field examinations to be undertaken (y) as it in its discretion deems necessary or appropriate, at its own expense, or (z) if required by applicable Law or if a Default shall have occurred and be continuing, at the expense of the Loan Parties.
6.11 Use of Proceeds. Use the proceeds of the Credit Extensions to provide ongoing working capital and for other general corporate purposes of the Borrower and its Subsidiaries, it being understood that no amounts may be drawn to fund the refinancing of the Existing Term Loan Facility and the Mezzanine Facility or pay related breakage costs, fees and expenses (other than to support mutually agreed Closing Date Letter of Credit requirements).
6.12 Covenant to Guarantee Obligations and Give Security.
(a) Upon the formation or acquisition of any new direct or indirect Subsidiary (other than any Unrestricted Subsidiary, a CFC, a Subsidiary that is held directly or indirectly by a CFC or any Domestic Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of the assets of such Domestic Subsidiary consist of Equity Interests in one or more Foreign Subsidiaries) by any Loan Party, then the Borrower shall, at the Borrowers expense, within the time period specified below unless the Administrative Agent in its sole discretion consents to an extension thereof:
(i) within 10 Business Days after such formation or acquisition, cause such Subsidiary, and cause each direct and indirect parent of such Subsidiary (if it has not already done so), to duly execute and deliver to the Administrative Agent a counterpart to this Agreement, in form and substance satisfactory to the Administrative Agent, guaranteeing the other Loan Parties obligations under the Loan Documents,
(ii) within 15 Business Days after such formation or acquisition, cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to duly execute and deliver to the Administrative Agent supplements to the Collateral Documents and other security and pledge agreements covering the personal property of such Subsidiaries, as specified by and in form and substance satisfactory to the Administrative Agent (including delivery of all Pledged Debt and Pledged Equity in and of such Subsidiary, and other instruments of the type specified in Section 4.01(a)(iii)), securing payment of all the Obligations of such Subsidiary or such parent, as the case may be, under the Loan Documents and constituting Liens on all such personal properties,
(iii) within 15 Business Days after such formation or acquisition, cause such Subsidiary and each direct and indirect parent of such Subsidiary (if it has not already done so) to take whatever action (including the filing of Uniform Commercial Code financing statements, the giving of notices and the endorsement of notices on title documents) may be necessary in the reasonable opinion of the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent
designated by it) valid and subsisting Liens on the personal properties purported to be subject to Collateral Documents, as applicable, and the security and pledge agreements delivered pursuant to this Section 6.12, enforceable against all third parties in accordance with their terms, and
(iv) within 15 Business Days after such formation or acquisition, deliver to the Administrative Agent, upon the request of the Administrative Agent in its sole discretion, a signed copy of a favorable opinion, addressed to the Administrative Agent and the other Credit Parties, of counsel for the Loan Parties acceptable to the Administrative Agent as to the matters contained in clauses (i), (ii) and (iii) above, and as to such other matters as the Administrative Agent may reasonably request.
(b) Subject to the Intercreditor Agreement, promptly grant to the Collateral Agent, within 30 days of the acquisition thereof, a security interest in and Mortgages on each parcel of Real Estate owned in fee by such Loan Party as is acquired by such Loan Party after the Closing Date and that, together with any improvements thereon, individually has a fair market value of at least $5.0 million as additional security for the Obligations (unless the subject property is already mortgaged to a third party to the extent permitted by Section 7.01). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and the Collateral Agent and shall constitute valid and enforceable perfected Liens subject only to Permitted Liens or other Liens acceptable to the Administrative Agent. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. Such Loan Party shall otherwise take such actions and execute and/or deliver to the Collateral Agent such documents as the Administrative Agent or the Collateral Agent shall require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Estate (including (i) a fully paid American Land Title Association Lenders Extended Coverage title insurance policies or applicable state title policy in form and substance, with endorsements and in amounts acceptable to the Administrative Agent, issued by title insurers reasonably acceptable to the Administrative Agent, insuring the Mortgages to be valid and subsisting Liens on the property described therein, free and clear of all defects (including, but not limited to, mechanics and materialmens Liens) and encumbrances, excepting only Permitted Encumbrances and other Liens permitted under the Loan Documents, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents, for mechanics and materialmens Liens and for zoning of the applicable property) and as the Administrative Agent may reasonably deem necessary or desirable (a Mortgage Policy), (ii) a Survey, (iii) the Flood Documentation and (iv) a local counsel opinion (in form and substance reasonably satisfactory to the Administrative Agent and the Collateral Agent) in respect of such Mortgage).
(c) Concurrently with the guarantee by any direct or indirect Domestic Subsidiary that is a Restricted Subsidiary of any obligations under the Term Loan
Documents, cause such direct or indirect Subsidiary to guarantee the Obligations of the Loan Parties hereunder and otherwise comply with the requirements of this Section 6.12.
(d) At any time upon request of the Administrative Agent, promptly execute and deliver any and all further instruments and documents and take all such other action as the Administrative Agent may deem reasonably necessary or desirable in obtaining the full benefits of, or (as applicable) in perfecting and preserving the Liens of, such guaranties, deeds of trust, trust deeds, deeds to secure debt, mortgages, leasehold mortgages, leasehold deeds of trust, supplements to the Collateral Documents and other security and pledge agreements.
(e) Subject to the terms of the Intercreditor Agreement and prior to the satisfaction of the Discharge of Term Obligations, with respect to any obligation under this Section 6.12 or any Collateral Document to deliver possession or control of any Collateral on which there is a Second Priority Lien by the Collateral Agent, such obligation shall be deemed satisfied by the delivery of possession or control of such Collateral to the collateral agent for the Term Facility (holding for the benefit of the Collateral Agent for the Credit Parties).
6.13 Cash Management.
(a) On or prior to the ninetieth day following the Closing Date (or such longer period as may be agreed by the Administrative Agent in its sole discretion):
(i) deliver to the Administrative Agent copies of notifications (each, a Credit Card Notification) substantially in the form attached hereto as Exhibit J which have been executed on behalf of such Loan Party and delivered to such Loan Partys credit card clearinghouses and processors listed on Schedule 6.13; and
(ii) enter into a blocked account agreement (each, a Blocked Account Agreement) substantially in the form attached as Exhibit K or such other form as reasonably acceptable to the Administrative Agent with respect to each Deposit Account of any Loan Party (other than Excluded Accounts) with each Blocked Account Bank (collectively, the Blocked Accounts).
(b) Each Credit Card Notification shall require the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) of all proceeds therefrom to a Blocked Account. Each Blocked Account Agreement shall require, after notice from the Collateral Agent to a Blocked Account Bank of the occurrence of a Cash Dominion Event (and until the Collateral Agent notifies such Blocked Account Bank that such Cash Dominion Event has terminated), the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Obligations) to the concentration account maintained by the Collateral Agent at JPMCB (the Concentration Account), of all cash receipts and collections, including, without limitation, the following:
(i) all available cash receipts from the sale of Inventory and other assets of the Loan Parties;
(ii) all proceeds of collections of Accounts;
(iii) all Net Cash Proceeds, and all other cash payments received by a Loan Party from any Person or from any source or on account of any sale or other transaction or event;
(iv) the then contents of each DDA;
(v) the then entire ledger balance of each Blocked Account; and
(vi) the net proceeds of all credit card charges.
(c) During the continuance of a Cash Dominion Event, the Loan Parties shall provide the Collateral Agent with an accounting of the contents of the Blocked Accounts and the Concentration Account, which shall identify, to the satisfaction of the Collateral Agent, the proceeds from the Term Priority Collateral which were deposited into a Blocked Account and swept to the Concentration Account. Upon the receipt of (x) the contents of the Blocked Accounts, and (y) such accounting, the Collateral Agent agrees to promptly remit to the agent under the Term Facility the proceeds of the Term Priority Collateral received by the Administrative Agent.
(d) The Concentration Account shall at all times be under the sole dominion and control of the Collateral Agent. The Loan Parties hereby acknowledge and agree that (i) the Loan Parties have no right of withdrawal from the Concentration Account, (ii) the funds on deposit in the Concentration Account shall at all times be collateral security for all of the Obligations and (iii) the funds on deposit in the Concentration Account shall be applied as provided in this Agreement. In the event that, notwithstanding the provisions of this Section 6.13, any Loan Party receives or otherwise has dominion and control of any such proceeds or collections, such proceeds and collections shall be held in trust by such Loan Party for the Collateral Agent, shall not be commingled with any of such Loan Partys other funds or deposited in any account of such Loan Party and shall, not later than the Business Day after receipt thereof, be deposited into the Concentration Account or dealt with in such other fashion as such Loan Party may be instructed by the Collateral Agent.
6.14 Physical Inventories. Cause at least one (1) physical perpetual cycle count at each of the Borrowers locations to be undertaken in each eighteen (18) month period conducted by such inventory takers as are satisfactory to the Collateral Agent and following such methodology as is consistent with the methodology used in the immediately preceding perpetual cycle count or as otherwise may be reasonably acceptable to the Collateral Agent. The Borrower shall provide the Collateral Agent information regarding the results of such cycle counts in form and detail consistent with past practices under the Existing Credit Agreement or as otherwise reasonably acceptable to the Administrative Agent.
6.15 Further Assurances. Promptly upon request by the Administrative Agent, or any Lender through the Administrative Agent, (a) correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation of any of the foregoing, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file,
register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to (i) carry out more effectively the purposes of the Loan Documents, (ii) to the fullest extent permitted by applicable Law, subject any Loan Partys or any of the Restricted Subsidiaries properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (iii) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Credit Parties the rights granted or now or hereafter intended to be granted to the Credit Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party or any of the Restricted Subsidiaries is or is to be a party, and cause each of the Restricted Subsidiaries to do so.
6.16 Lenders Meetings. The Borrower will, upon the request of the Administrative Agent or Required Lenders, participate in a meeting of the Administrative Agent and Lenders once during each Fiscal Year to be held, at the request of the Administrative Agent or Required Lenders, by teleconference or at the Borrowers corporate offices (or at such other location as may be agreed to by the Borrower and the Administrative Agent) at such time as may be agreed to by the Borrower and the Administrative Agent.
6.17 Designation as Senior Debt. Designate all Obligations as Designated Senior Indebtedness (or any similar term) under, and defined in, any Subordinated Indebtedness of any Loan Party which contains such designations.
6.18 Designation of Subsidiaries. The board of directors of Holdings may at any time designate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Default shall have occurred and be continuing, (ii) the Borrower may not be designated as an Unrestricted Subsidiary, (iii) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a Restricted Subsidiary for the purpose of the Term Loan Documents, (iv) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary, (v) no Unrestricted Subsidiary shall own any Equity Interests in any Restricted Subsidiary (vi) no Unrestricted Subsidiary shall hold any Indebtedness of, or any Lien on any property of, the Borrower or any Restricted Subsidiary, (vii) no Unrestricted Subsidiary shall be a party to any transaction or arrangement with the Borrower and its Restricted Subsidiaries that would not be permitted by Section 7.08, and (viii) none of Holdings or any of its Restricted Subsidiaries shall have any obligation to subscribe for additional Equity Interests of any Unrestricted Subsidiary or to preserve or maintain the financial condition of any Unrestricted Subsidiary. The designation of any Subsidiary as an Unrestricted Subsidiary shall constitute an Investment by Holdings and its Restricted Subsidiaries therein at the date of designation in an amount equal to the net book value of Holdings or such Restricted Subsidiarys (as applicable) investment therein. The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary existing at such time. The Borrower shall cause each of the Restricted Subsidiaries and Unrestricted Subsidiaries to satisfy customary corporate and other formalities.
6.19 Post-Closing Matters. Within seven (7) days after the Closing Date (or such later date to be agreed by the agent under the Term Loan Documents), the Borrower shall deliver to the agent under the Term Loan Documents the certificates representing the Pledged Equity referred to in the Pledge Agreement accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank or with other appropriate instruments of transfer (to the extent not previously delivered to the agent under the Term Loan Documents).
ARTICLE VII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder shall remain unpaid or unsatisfied (other than any (i) indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement and (ii) Obligations under Other Liabilities) or any Letter of Credit shall remain outstanding, the Borrower shall not (and with respect to Section 7.13 only, Holdings shall not), nor shall the Borrower permit any Restricted Subsidiary to, directly or indirectly:
7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, other than the following Liens (Liens described below are herein referred to as Permitted Liens):
(a) Liens pursuant to any Loan Document;
(b) Liens existing on the date hereof and listed on Schedule 7.01(b) and any renewals or extensions thereof, provided that (i) the property covered thereby is not changed in any material manner, (ii) the amount secured or benefited thereby is not increased except as contemplated by Section 7.02(e), (iii) the direct and contingent obligors with respect thereto are not changed (other than to decrease the number of obligors), and (iv) any renewal or extension of the obligations secured or benefited thereby is permitted by Section 7.02(e);
(c) Liens for taxes not yet due or which are the subject of a Permitted Protest;
(d) carriers, warehousemens, mechanics, materialmens, repairmens or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are the subject of a Permitted Protest;
(e) (i) pledges or deposits in the ordinary course of business in connection with workers compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA and (ii) pledges and deposits in the ordinary course of business securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to Holdings or any of its Restricted Subsidiaries;
(f) deposits to secure the performance of bids, trade contracts and leases (other than Indebtedness for borrowed money), statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances affecting Real Estate which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the applicable Person;
(h) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(i);
(i) Liens securing Indebtedness permitted under Section 7.02(g); provided that (i) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (ii) the Indebtedness secured thereby does not exceed the cost of the property being acquired on the date of acquisition, and (iii) such Lien and the Indebtedness secured thereby are incurred contemporaneously with or within two hundred seventy (270) days after the acquisition of such property;
(j) Liens on the Collateral securing the Term Obligations having the priority set forth in the Intercreditor Agreement;
(k) landlords and lessors Liens in respect of rent and other lease obligations that are not past due for a period of 60 days or more or that are the subject of a Permitted Protest;
(l) possessory Liens in favor of brokers and dealers arising in connection with the acquisition or disposition of Investments, provided that such Liens (i) attach only to such Investments and (ii) secure only obligations incurred in the ordinary course and arising in connection with the acquisition or disposition of such Investments and not any obligation in connection with margin financing;
(m) Liens arising solely by virtue of any statutory or common law provisions relating to bankers Liens, ordinary course Liens in favor of securities intermediaries, rights of setoff or similar rights and remedies as to deposit accounts or securities accounts or other funds maintained with depository institutions or securities intermediaries;
(n) Liens arising from precautionary UCC filings regarding true operating leases or the consignment of goods to a Loan Party;
(o) Liens in favor of customs and revenues authorities imposed by applicable Law arising in the ordinary course of business in connection with the importation of goods and securing obligations (i) that are not overdue by more than thirty (30) days, or (ii) that are the subject of a Permitted Protest;
(p) Liens on specific existing assets and proceeds thereof (other than assets of the type included in the Borrowing Base, except to the extent that the Administrative Agent is reasonably satisfied that such Lien does not interfere with Collateral Agents Lien on such assets and Collateral Agents ability to realize on such Lien on such assets
and the proceeds thereof) of a Person acquired following the Closing Date in existence on the date such Person became a Restricted Subsidiary; provided that such Liens were not created in anticipation of the transaction pursuant to which such Person became a Restricted Subsidiary;
(q) licenses of Intellectual Property permitted under Section 7.05(g) hereof;
(r) Liens on the assets of Foreign Subsidiaries securing Indebtedness or other obligations of Foreign Subsidiaries permitted by Section 7.02;
(s) other Liens securing Indebtedness or other obligations of the Borrower and the Subsidiary Guarantors outstanding in an aggregate principal amount not to exceed $15.0 million; provided that no such Lien shall extend to or cover any Collateral;
(t) leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) in any case materially detract from the value of the property subject thereto or (ii) interfere in any material respect with the business of the Borrower and its Subsidiaries or (iii) secure any Indebtedness;
(u) Liens solely on any cash earnest money deposits made by the Borrower or any of the Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
(v) ground leases in respect of real property on which facilities owned or leased by the Borrower or any of its Subsidiaries are located; and
(w) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto.
7.02 Indebtedness. Create, incur, assume, guarantee, suffer to exist or otherwise become liable with respect to any Indebtedness, except (Indebtedness described below is herein referred to as Permitted Indebtedness):
(a) obligations (contingent or otherwise) of the Borrower or any of the Restricted Subsidiaries existing or arising under any Swap Contract, provided that (i) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with fluctuations in interest rates or foreign exchange rates or otherwise to mitigate risks associated with its assets or liabilities or business operations, and (ii) such Swap Contract does not contain any provision exonerating the counterparty to such Swap Contract from its obligation to make payments on outstanding transactions to the Borrower or the Restricted Subsidiaries (notwithstanding that the Borrower or a Restricted Subsidiary is the defaulting party);
(b) (i) Indebtedness of a Restricted Subsidiary of the Borrower owed to the Borrower or to another Restricted Subsidiary of the Borrower and (ii) Indebtedness of the Borrower owed to any Restricted Subsidiaries of the Borrower, in each case, which Indebtedness shall (A) in the case of Indebtedness owed to a Loan Party, constitute
Pledged Debt under the Security Agreement, (B) be on terms (including subordination terms, if owed by a Loan Party) acceptable to the Administrative Agent and (C) be otherwise permitted under the provisions of Section 7.03;
(c) Indebtedness under the Loan Documents;
(d) Indebtedness of the Loan Parties under the Term Facility and any Permitted Refinancing Indebtedness in respect thereof (including Guarantees of any Guarantor in respect of such Indebtedness) not to exceed the sum of (i) $275.0 million and (ii) provided that the Borrower is in compliance on a Pro Forma Basis with the covenant set forth in Section 7.15 of the Term Loan Credit Agreement (as such Term Loan Credit Agreement including, without limitation, all relevant definitions required to determine compliance with such covenant, is in effect on the Closing Date), up to an additional $50.0 million.
(e) Indebtedness outstanding on the date hereof and listed on Schedule 7.02 and any Permitted Refinancing Indebtedness in respect thereof;
(f) Guarantees of the Borrower or any Guarantor in respect of Indebtedness otherwise permitted hereunder of the Borrower or any Subsidiary Guarantor;
(g) Indebtedness in respect of Capital Lease Obligations, Synthetic Lease Obligations, and purchase money obligations for fixed or capital assets within the limitations set forth in Section 7.01(i) and Permitted Refinancing Indebtedness in respect thereof; provided, however, that the aggregate amount of all such Indebtedness at any one time outstanding shall not exceed $35.0 million;
(h) Permitted Holdco Debt;
(i) Indebtedness of any Person that becomes a Restricted Subsidiary of the Borrower after the date hereof in accordance with the terms of Section 7.03(h), which Indebtedness is existing at the time such Person becomes a Restricted Subsidiary of the Borrower (other than Indebtedness incurred solely in contemplation of such Persons becoming a Restricted Subsidiary of the Borrower) and Permitted Refinancing Indebtedness in respect thereof;
(j) (i) unsecured Indebtedness of any Loan Party with no scheduled payments of principal until the date that is 6 months after the Latest Maturity Date; provided that (A) on a Pro Forma Basis, the Consolidated Leverage Ratio (calculated to exclude the net cash proceeds from Indebtedness incurred pursuant to this Section 7.02(j)) for the Measurement Period most recently ended prior to the incurrence of such Indebtedness is no greater than 4.50 to 1.00, (B) the Borrower is in compliance on a Pro Forma Basis with the covenant set forth in Section 7.15 of the Term Loan Credit Agreement (as such Term Loan Credit Agreement including, without limitation, all relevant definitions required to determine compliance with such covenant, is in effect on the Closing Date) as of the last day of the Measurement Period most recently ended prior to the incurrence of such Indebtedness and (C) no Event of Default shall have occurred and be continuing at
the time of and immediately after the incurrence of such Indebtedness and (ii) Permitted Refinancing Indebtedness in respect of Indebtedness permitted by subclause (i) above;
(k) Indebtedness of the Loan Parties in an aggregate principal amount not to exceed $35.0 million at any time outstanding;
(l) Indebtedness of Foreign Subsidiaries under the Swedish Credit Facility in an aggregate amount not to exceed the U.S. dollar equivalent (as reasonably determined by the Administrative Agent) of $65.0 million outstanding at any time; and
(m) other Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed $10.0 million outstanding at any time.
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 non-U.S. currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred; provided that, if such Indebtedness is incurred to extend, replace, refund, refinance, renew or defease other Indebtedness denominated in a foreign currency, and such extension, replacement, refunding, refinancing, renewal or defeasance 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 extension, replacement, refunding, refinancing, renewal or defeasance, 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 the principal amount of such Indebtedness being extended, replaced, refunded, refinanced, renewed or defeased.
7.03 Investments. Make or hold any Investments, except:
(a) Investments held by the Borrower and the Restricted Subsidiaries in the form of Cash Equivalents;
(b) Investments consisting of loans and advances to officers, directors and employees of Holdings and its Restricted Subsidiaries to finance the purchase of capital stock of Holdings and for travel, entertainment, relocation and analogous ordinary business purposes, in an aggregate amount not to exceed $2.5 million at any time outstanding;
(c)
(i) Investments outstanding on the Closing Date by Borrower and its Restricted Subsidiaries in their respective Subsidiaries;
(ii) additional Investments by Borrower and its Restricted Subsidiaries in Restricted Subsidiaries that are Loan Parties at the time of the making of such Investment;
(iii) additional Investments by Subsidiaries of the Borrower that are not Loan Parties (including Foreign Subsidiaries) in other Restricted Subsidiaries that are not Loan Parties (including Foreign Subsidiaries); and
(iv) additional Investments by the Loan Parties (other than Holdings) in Restricted Subsidiaries that are not Loan Parties in an aggregate amount when taken together with all purchases and acquisitions referred to in Section 7.03(h)(ii), during the term of this Agreement not to exceed (A) the greater of (x) $25.0 million and (y) 3% of total Consolidated assets of Borrower and its Restricted Subsidiaries as of the last day of the most recently completed Measurement Period (net of any cash return of principal or capital on any such Investment, purchases or acquisitions made pursuant to this Section 7.03(c)(iv) or Section 7.03(h)(ii) or Section 7.03(l) to Borrower or a Subsidiary Guarantor that is not applied pursuant to the parenthetical phrase in Section 7.03(h)(ii)(y) or Section 7.03(l)(x)) plus (B) an amount equal to the amount of cash distributions to the Borrower or a Subsidiary Guarantor following the Closing Date from the Foreign Subsidiaries that has not been redistributed to any Foreign Subsidiary, in each case so long as (A) no Default or Event of Default then exists or would arise therefrom and (B) the Borrower has demonstrated to the reasonable satisfaction of the Administrative Agent that average monthly Excess Availability, as projected on a pro forma basis for the twelve (12) months following and after giving effect to such Investment, will be equal to or greater than:
(1) fifteen percent (15%) of the Borrowing Base (to the extent the aggregate amount of Investments made under this clause (iv) (including such additional Investment taken together with all purchases and acquisitions referred to in Section 7.03(h)(ii)) during the period from and after the Closing Date up to and including the date of such additional Investment do not exceed the greater of (x) $10.0 million and (y) 1% of total Consolidated assets of the Borrower and its Restricted Subsidiaries as of the last day of the most recently completed Measurement Period), or
(2) $25.0 million (to the extent the aggregate amount of Investments made under this clause (iv) (including such additional Investment taken together with all purchases and acquisitions referred to in Section 7.03(h)(ii)) during the period from and after the Closing Date up to and including the date of such additional Investment exceed the greater of (x) $10.0 million and (y) 1% of total Consolidated assets of the Borrower and its Restricted Subsidiaries as of the last day of the most recently completed Measurement Period);
(d) Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss;
(e) Guarantees permitted by Section 7.02;
(f) Investments existing on the date hereof and set forth on Schedule 5.08(e) and any modification, replacement, renewal, reinvestment or extension of any of the foregoing that does not increase the amount thereof;
(g) Investments in Swap Contracts permitted under Section 7.02(a);
(h) the purchase or other acquisition of all of the Equity Interests in, or all or substantially all of the property, or assets comprising a business unit of, any Person; provided that, with respect to each purchase or other acquisition made pursuant to this Section 7.03(h) (each such purchase or acquisition, a Permitted Acquisition):
(i) any such newly-created or acquired Restricted Subsidiary as a result of any such transaction shall comply with the applicable requirements of Sections 6.12 and 6.13;
(ii) any such purchase or other acquisition that, upon the consummation thereof, does not result in the assets or property so purchased or acquired being wholly-owned directly by the Borrower or one or more Subsidiary Guarantors or, in the case of any acquisition of Equity Interests that does not result in the Person(s) so acquired becoming a Subsidiary Guarantor(s), in each case, within 10 Business Days after such purchase or acquisition shall not exceed, together with all such other purchases or other acquisitions and all Investments referred to in Section 7.03(c), the greater of (x) $25.0 million and (y) 3% of total Consolidated assets of Borrower and its Restricted Subsidiaries as of the last day of the most recently completed Measurement Period (net of any cash return of principal on capital on any acquisition, purchase or Investment made pursuant to this Section 7.03(h)(ii) or Section 7.03(c)(iv) or Section 7.03(l) to Borrower or a Subsidiary Guarantor that is not applied pursuant to the parenthetical phrase in Section 7.03(c)(iv)(y) or 7.03(l)(x);
(iii) after giving effect to such purchase or acquisition and the payment of any deferred purchase price obligations in connection therewith (as projected in good faith by the Borrower), Excess Availability is not less than $25.0 million;
(iv) after giving effect to such purchase or other acquisition and any financing thereof, the Consolidated Fixed Charge Coverage Ratio on a Pro Forma Basis as of the last day of the most recently ended Fiscal Quarter shall not be less than 1.0:1.0;
(v) immediately before and immediately after giving effect to any such purchase or other acquisition, no Event of Default shall have occurred and be continuing; and
(vi) the Borrower shall have delivered to the Administrative Agent, on or prior to the date on which any such purchase or other acquisition is to be consummated, a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this clause (h) have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition (other than the requirements of clause (i), which will be satisfied as required by Sections 6.12 and 6.13);
(i) Investments resulting from the issuance of Indebtedness of Holdings to the Borrower or any of the Restricted Subsidiaries in an amount not to exceed the amount necessary to permit Holdings to pay (i) so long as no Event of Default shall have occurred and be continuing at the time thereof or would result therefrom, reasonable and customary corporate and out-of-pocket operating expenses actually payable to persons that are not Affiliates relating to maintaining its ownership interest in the Borrower (including reasonable out-of-pocket expenses for legal, administrative and accounting services provided by third parties, and compensation, benefits and other amounts payable to officers and employees in connection with their employment in the ordinary course of business and to board of director observers), (ii) franchise fees or similar Taxes and fees required to maintain its corporate existence, (iii) any income Taxes imposed on Holdings or its direct or indirect parent of Holdings as the common parent of a consolidated, combined or similar Tax group of which the Borrower and/or its Restricted Subsidiaries are members, up to an amount not to exceed the amount of any such income Taxes that the Borrower and its Restricted Subsidiaries would have been required to pay on a separate company (or a stand-alone Tax group) basis (reduced by any income Taxes paid directly by the Borrower or its Restricted Subsidiaries); provided that in determining the hypothetical income Tax liability of the Borrower and/or its Restricted Subsidiaries on a separate company (or a stand-alone Tax group) basis for the purpose of clause (iii), any interest expense on any Indebtedness incurred by Holdings shall be treated as the interest expense of the Borrower; provided further that any payments by Borrower or any of its Restricted Subsidiaries attributable to the income of any Unrestricted Subsidiary shall be permitted only to the extent that cash payments were made for such purpose by such Unrestricted Subsidiary to the Borrower or to any of its Restricted Subsidiaries and (iv) all costs or fees incurred in compliance with or in anticipation of compliance with Securities Laws and state securities Laws;
(j) promissory notes and other non-cash consideration that is permitted to be received in connection with Dispositions permitted by Section 7.05;
(k) any Investments made with the proceeds received by or contributed to the Borrower from the substantially concurrent issuance of new Equity Interests (other than Disqualified Equity Interests) issued by Holdings and not used for any other purpose permitted under this Agreement;
(l) without duplication of any other Investments permitted hereunder, other Investments by the Borrower or any of the Restricted Subsidiaries not exceeding (x) $10.0 million in any Fiscal Year (with the unused portion of such scheduled amount available for use in any succeeding Fiscal Year), net of any cash return to the Borrower and its Restricted Subsidiaries of principal or capital of any such Investment or (y) $25.0 million in the aggregate (net of any cash return of principal or capital of any Investment, purchase or acquisition made pursuant to this Section 7.03(l) or Section 7.03(h)(ii) or Section 7.03(c)(iv) to the Borrower or a Subsidiary Guarantor that is not applied pursuant to the parenthetical phrase in Section 7.03(c)(iv)(y) or 7.03(h)(ii));
(m) other Investments at any time in an amount not to exceed the Available Amount at such time so long as (i) no Event of Default shall have occurred and be
continuing or would result from such Investment and (ii) after giving effect to such Investment, the Consolidated Fixed Charge Coverage Ratio would be at least 1.25:1.00 as of the last day of the most recently ended Fiscal Quarter calculated on a Pro Forma Basis;
(n) Investments to the extent that payment for such Investments is made solely with Qualified Equity Interests of Holdings (or any direct or indirect parent thereof);
(o) Investments held by a Restricted Subsidiary acquired after the Closing Date or of a Person merged into the Borrower or merged or consolidated with a Restricted Subsidiary in accordance with Section 7.04 after the Closing Date (other than existing Investments in subsidiaries of such Subsidiary or Person, which must comply with the requirements of Sections 7.02(h) or (l)) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation; and
(p) Guarantees by the Borrower or any of the Restricted Subsidiaries of leases (other than Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business.
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, except that:
(a) any Restricted Subsidiary of the Borrower may merge with (i) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (ii) any one or more other Restricted Subsidiaries, provided that when any Loan Party is merging with another Restricted Subsidiary that is not a Loan Party, such Loan Party shall be the continuing or surviving Person;
(b) any Restricted Subsidiary (other than the Borrower) may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Borrower or to another Loan Party (other than Holdings);
(c) any Subsidiary that is not a Loan Party (i) may dispose of all or substantially all its assets (including any Disposition that is in the nature of a liquidation) to (A) another Subsidiary that is not a Loan Party or (B) to a Loan Party (other than Holdings), or (ii) may be dissolved, with its assets (if any) being transferred in accordance with clause (i) hereof;
(d) in connection with any acquisition permitted under Section 7.03, any Restricted Subsidiary of the Borrower may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided that (i) the Person surviving such merger shall be a wholly-owned Restricted Subsidiary of the Borrower, (ii) in the case of any such merger to which any Loan Party (other than the
Borrower) is a party, such Loan Party is the surviving Person and (iii) in the case of any merger involving the Borrower, the Borrower is the surviving Person;
(e) any Disposition permitted by Section 7.05 may be structured as a sale of all or substantially all of the Equity Interests of a Subsidiary,
(f) any Subsidiary which has no assets to distribute to its equity holders may be dissolved or liquidated; and
(g) any Foreign Subsidiary that is not a Material Subsidiary may be dissolved or liquidated, including through an insolvency, bankruptcy or equivalent proceeding.
7.05 Dispositions. Make any Disposition or enter into any agreement to make any Disposition, except:
(a) Dispositions of obsolete or worn out property, or property (including Intellectual Property) that is no longer used or useful in the business of the Borrower and its Restricted Subsidiaries whether now owned or hereafter acquired, in each case, in the ordinary course of business (it being understood that this clause (a) does not include the liquidation of any Store or the inventory and other assets located therein);
(b) Dispositions of inventory and goods held for sale in the ordinary course of business;
(c) Dispositions of equipment or Real Estate to the extent that such property is exchanged for credit against all or a portion of the purchase price of similar replacement property and, if such property is Collateral, then such replacement property is made subject to Liens and security interests in favor of the Collateral Agent for the benefit of the Credit Parties;
(d) Dispositions of property by any Subsidiary to the Borrower or to a wholly-owned Restricted Subsidiary; provided that if the transferor of such property is a Subsidiary Guarantor, the transferee thereof must either be the Borrower or a Subsidiary Guarantor or an Investment permitted under Section 7.03;
(e) Dispositions permitted by Sections 7.04(a), (b), (c), (d), (f) and (g);
(f) bulk sales or other dispositions of the Inventory of the Borrower or a Restricted Subsidiary not in the ordinary course of business in connection with Store closings, at arms length, provided, that such Store closures and related Inventory dispositions shall not exceed (i) in any Fiscal Year, ten percent (10%) of the number of the Borrowers and its Restricted Subsidiaries Stores as of the beginning of such Fiscal Year (net of new Store openings in such Fiscal Year) and (ii) in the aggregate from and after the Closing Date, twenty-five percent (25%) of the number of the Borrowers and its Restricted Subsidiaries Stores in existence as of the Closing Date (net of new Store openings), provided, that all sales of Inventory in connection with Store closings in excess of ten (10) Store closings in any three month period, shall be in accordance with liquidation agreements and with professional liquidators reasonably acceptable to the
Administrative Agent; provided, further that all Net Cash Proceeds received in connection therewith are applied to the Obligations if then required hereunder;
(g) grants of licenses of Intellectual Property in the ordinary course of business, which do not materially interfere with the business of the Borrower and the Restricted Subsidiaries, taken as a whole;
(h) Dispositions by the Borrower and the Restricted Subsidiaries not otherwise permitted under this Section 7.05; provided that (i) at the time of such Disposition, no Default shall exist or would result from such Disposition, (ii) the aggregate book value of all property Disposed of in reliance on this clause (h) in any Fiscal Year of the Borrower shall not exceed $10.0 million; provided that an additional aggregate book value of not more than $5.0 million per year of property held by Foreign Subsidiaries may be Disposed of in reliance on this clause (h) and (iii) at least 75% of the purchase price for such asset shall be paid to the Borrower or such Restricted Subsidiary in cash (with an assumption of Indebtedness (other than Subordinated Indebtedness) of the Borrower or such Restricted Subsidiary by a purchaser in connection with the applicable Disposition shall be deemed to be cash for the purposes of this clause (iii));
(i) licenses for the conduct of licensed departments (other than to an Affiliate of any Loan Party) within any Store in the ordinary course of business; and
(j) any issuance or sale of Equity Interests in, or sale of Indebtedness or other securities of, an Unrestricted Subsidiary;
provided, however, that any Disposition pursuant to clauses (a) though (d), and clauses (f) and (h) shall be for fair market value.
7.06 Restricted Payments. Declare or make, directly or indirectly, any Restricted Payment, except that:
(a) each Restricted Subsidiary of the Borrower may make Restricted Payments to any other Loan Party (other than Holdings) and any other Person that owns a direct Equity Interest (other than Disqualified Equity Interests) in such Restricted Subsidiary, ratably according to their respective holdings of the type of Equity Interests in respect of which such Restricted Payment is being made;
(b) the Borrower and each of its Restricted Subsidiaries may declare and make dividend payments or other distributions payable solely in the common or preferred stock or other common or preferred Equity Interests of such Person (other than Disqualified Equity Interests); provided that such Equity Interests shall be pledged to the Collateral Agent to the extent required by Section 6.12 hereof;
(c) the Borrower may declare and pay cash dividends to Holdings in an amount not to exceed an amount necessary to permit Holdings to pay (i) reasonable and customary corporate and operating expenses relating to maintaining its ownership interest in the Borrower (including reasonable out-of-pocket expenses for legal, administrative and accounting services provided by third parties, and compensation, benefits and other
amounts payable to officers and employees in connection with their employment in the ordinary course of business and to board of director observers), (ii) franchise Taxes and similar fees required to maintain its corporate existence, (iii) any income Taxes imposed on Holdings or its direct or indirect parent of Holdings as the common parent of a consolidated, combined or similar Tax group of which the Borrower and/or its Restricted Subsidiaries are members, up to an amount not to exceed the amount of any such income Taxes that the Borrower and its Restricted Subsidiaries would have been required to pay on a separate company (or a stand-alone Tax group) basis (reduced by any income Taxes paid directly by the Borrower or its Restricted Subsidiaries); provided that in determining the hypothetical income Tax liability of the Borrower and/or its Restricted Subsidiaries on a separate company (or a stand-alone Tax group) basis for the purpose of clause (iii), any interest expense on any Indebtedness incurred by Holdings shall be treated as the interest expense of the Borrower and any dividends by Borrower attributable to the income of any Unrestricted Subsidiary shall be permitted only to the extent that cash payments were made for such purpose by such Unrestricted Subsidiary to the Borrower or any of its Restricted Subsidiaries and (iv) all costs or fees incurred in compliance with or in anticipation of compliance with Securities Laws and state securities Laws;
(d) the Borrower may (or make Restricted Payments to allow Holdings or any direct or indirect parent thereof to) repurchase, redeem or otherwise acquire or retire shares of its capital stock held by officers, directors or employees of Holdings or any Restricted Subsidiary(or their estates or trusts) following the death, disability or termination of employment of any such Person and, so long as no Default shall have occurred and be continuing (or would result therefrom), the Borrower may pay dividends to Holdings to permit such repurchase, redemption, retirement or acquisition; provided that the aggregate amount of payments to Holdings by the Borrower under this clause (d) will not exceed $2.5 million in any Fiscal Year of the Borrower (with any unused portion of such scheduled amount available for use in any succeeding Fiscal Year);
(e) so long as no Event of Default shall have occurred and be continuing or would result therefrom, the Borrower and each of its Restricted Subsidiaries may make other Restricted Payments, at any time in an amount not to exceed the sum of (i) $10.0 million in the aggregate during the term of this Agreement and (ii) if, after giving effect to such Restricted Payment on a Pro Forma Basis, the Consolidated Fixed Charge Coverage Ratio as of the last day of the most recently ended Fiscal Quarter would be not less than 1.25:1.00, the Available Amount at such time (for the purposes of clarity, the Available Amount under this clause (ii) cannot be used to make Restricted Payments (or payments to Holdings in order for Holdings to make) in order to make cash dividend payments on Holdings preferred stock);
(f) Investments permitted by Section 7.03;
(g) repurchases of Equity Interests in Holdings, the Borrower or any of the Restricted Subsidiaries deemed to occur upon exercise of stock options or warrants or similar rights to the extent such Equity Interests represent a portion of the exercise price of such options or warrants or similar rights;
(h) the Borrower may make Restricted Payments to Holdings or to any direct or indirect parent of Holdings (and Holdings may make Restricted Payments to any direct or indirect parent of Holdings) the proceeds of which shall be used to make payments permitted under Sections 7.08(d), (e) and (h) (but only to the extent such payments have not been and are not expected to be made by the Borrower or a Restricted Subsidiary);
(i) the declaration and payment of dividends on the Borrowers common stock following the first public offering of the Borrowers common stock or the common stock of any of its direct or indirect parents after the Closing Date, of up to 6.0% per annum of the net 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
(j) the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration (i) such payment would have complied with the provisions of clause (i) of this Section 7.06 and (ii) no Event of Default occurred and was continuing;
provided, for purposes of calculating the amount available to make Restricted Payments, any dividend or distribution paid in reliance on clause (j) shall be deemed to be a Restricted Payment on the date of declaration and not on the date of payment.
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 date hereof or any business reasonably related or ancillary thereto.
7.08 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Loan Parties (or any Unrestricted Subsidiary, whether or not an Affiliate of any Loan Party), whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Loan Parties or such Restricted Subsidiary as would be obtainable by the Loan Parties or such Restricted Subsidiary at the time in a comparable arms length transaction with a Person other than an Affiliate; provided that the foregoing restriction shall not apply to:
(a) transactions among (i) the Loan Parties, (ii) any Restricted Subsidiaries of Holdings that are not Loan Parties or (iii) the Loan Parties, on the one hand, and any Restricted Subsidiary that is not a Loan Party, on the other hand, that are at least as favorable to the Loan Parties as could be obtained in an arms-length transaction from an unaffiliated party;
(b) (i) any Indebtedness permitted by Section 7.02(b); (ii) any Investments permitted by Section 7.03 (other than Investments in any Equity Investor or a portfolio company owned or controlled by an Equity Investor (other than any Loan Party)); and (iii) any Restricted Payment permitted by Section 7.06;
(c) so long as no Event of Default has occurred and is continuing or would result therefrom, the payment of (i) Management Fees, provided that fees and other amounts paid under the Management Agreement (other than expense reimbursements)
shall not exceed $2.5 million in any Fiscal Year plus the amount of such annual limit not paid in the previous Fiscal Year, and (ii) Transaction Expenses;
(d) employment, consulting (exclusive of the Management Agreement) and severance agreements;
(e) loans and advances permitted by Section 7.03(b);
(f) payment of directors fees, expenses and indemnities;
(g) incurrence of Subordinated Indebtedness by the Loan Parties to the Equity Investors otherwise permitted hereunder or the issuance of Equity Interests by Holdings to the Equity Investors, provided that no such Equity Interests may constitute Disqualified Equity Interests;
(h) transactions with joint ventures permitted hereunder for the purchase or sale of goods and services entered into in the ordinary course of business on terms no less favorable to the Loan Parties or such Restricted Subsidiary as would be obtainable by the Loan Parties or such Restricted Subsidiary at the time in a comparable arms length transaction;
(i) customary payments by the Borrower and any of its Restricted Subsidiaries to the Sponsor made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with acquisitions or divestitures), which payments are approved by a majority of the disinterested members of the board of directors of Holdings in good faith;
(j) transactions in which the Borrower or any of the Restricted Subsidiaries, as the case may be, delivers to the Administrative Agent a letter from an Independent Financial Advisor stating that such transaction is fair to the Borrower or such Restricted Subsidiary from a financial point of view;
(k) investments by the Sponsor or the Equity Investors in securities of Holdings, the Borrower or any of the Restricted Subsidiaries so long as (i) the investment is being offered generally to other investors on the same or more favorable terms and (ii) the investment constitutes less than 5.0% of the proposed or outstanding issue amount of such class of securities; and
(l) Restricted Payments permitted by Section 7.06.
7.09 Burdensome Agreements. Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that (a) limits the ability (i) of any Restricted Subsidiary of Borrower to make Restricted Payments to any Loan Party or to otherwise transfer property to or invest in any Loan Party, except for any agreement in effect (A) on the date hereof and set forth on Schedule 7.09 and any modification, replacement, renewal, reinvestment or extension of any of the foregoing or (B) at the time any Person becomes a Restricted Subsidiary of Borrower, so long as such agreement was not entered into solely in contemplation of such Person becoming a Restricted Subsidiary of Borrower, (ii) of any
Restricted Subsidiary of Borrower to Guarantee the Indebtedness of the Borrower, (iii) of any Restricted Subsidiary of Borrower to make or repay loans to a Loan Party or (iv) of the Borrower or any Restricted Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person; provided, however, that this clause (iv) shall not prohibit any negative pledge incurred or provided in favor of any holder of Indebtedness permitted under Section 7.02 solely to the extent any such negative pledge relates to the property financed by or the subject of such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a Lien is granted to secure another obligation of such Person. The foregoing restrictions shall not be violated by reason of (i) applicable Laws, (ii) this Agreement and the other Loan Documents, (iii) (A) the Term Loan Documents so long as the restrictions of the kind referred to in the previous sentence contained therein, taken as a whole, are not materially more restrictive than those contained in the Term Loan Documents (as in effect on the Closing Date), (B) the Swedish Credit Facility, or (C) documents governing Permitted Holdco Debt so long as the restrictions of the kind referred to in the previous sentence contained therein, taken as a whole, are no more restrictive than those contained herein, (iv) customary non-assignment provisions of any contract, lease or license of the Borrower or any Restricted Subsidiary of the Borrower, (v) customary restrictions on a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Equity Interests or assets of a Subsidiary pending the closing of such sale or disposition, (vi) customary provisions in joint venture agreements and other similar agreements applicable to joint ventures entered into in the ordinary course of business, (vii) documents that represent Indebtedness of a Restricted Subsidiary that is not a Loan Party that is permitted by Section 7.02 to the extent such restriction applies only to such Restricted Subsidiary, (viii) documents that comprise restrictions imposed by any agreement governing Indebtedness entered into after the Closing Date and permitted under Section 7.02 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 its obligation or ability to make any payments or grant any Liens required hereunder or (vii) any restrictions under any agreement that amends, refinances or replaces any agreement containing restrictions permitted under the preceding clauses provided that the terms and conditions are no less favorable taken as a whole to the Restricted Subsidiary.
7.10 Amendments of Material Indebtedness. Amend, modify or waive any of the Loan Partys rights under any Material Indebtedness (other than on account of any refinancing thereof otherwise permitted hereunder), in each case, to the extent that such amendment, modification or waiver would reasonably be likely to have a Material Adverse Effect.
7.11 Accounting Changes. Make any change in their Fiscal Year; provided, however, that Holdings and the Borrower may, upon written notice to the Administrative Agent, change its fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, Holdings, 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.
7.12 Prepayments, Etc. of Indebtedness. Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner any Indebtedness, or make any payment in violation of any subordination terms of any Subordinated Indebtedness, except (a) regularly scheduled or mandatory repayments or redemptions of Permitted Indebtedness, (b) prepayments of Indebtedness under the Swedish Credit Facility, (c) voluntary prepayments, redemptions, purchases, defeasances or other satisfactions of Permitted Indebtedness (excluding on account of any Subordinated Indebtedness) as long as (i) no Default or Event of Default then exists or would arise as a result of entering into such transaction or the making of such payments and (ii) the Borrower has demonstrated to the reasonable satisfaction of the Administrative Agent that monthly average Excess Availability, as projected on a Pro Forma Basis for the 12 months following and after giving effect to such prepayment will be equal to or greater than $25.0 million, (d) any voluntary prepayments, redemptions, purchases, defeasances or other satisfactions of Permitted Indebtedness made with the proceeds of Permitted Refinancing Indebtedness, (e) the conversion (or exchange) of any Indebtedness to Equity Interests (other than Disqualified Equity Interests) or Indebtedness of Holdings or any of its direct or indirect parents, (f) voluntary prepayments, redemptions, purchases, defeasances or other satisfactions of Permitted Indebtedness in an amount not to exceed the Available Amount at such time so long as (i) no Event of Default then exists or would arise as a result of entering into such transaction or the making such payment and (ii) after giving effect to such prepayment, redemption, purchase, defeasance or other satisfaction on a Pro Forma Basis, the Consolidated Fixed Charge Coverage Ratio would be at least 1.25:1.00 as of the last day of the most recently ended Fiscal Quarter and (g) the prepayment of Indebtedness incurred pursuant to clauses (a), (b) and (g) of Section 7.02.
7.13 Holding Company. In the case of Holdings, engage in any business or activity other than (a) the ownership of all outstanding Equity Interests in the Borrower, (b) maintaining its corporate existence, (c) participating in Tax, accounting and other administrative activities as the parent of the Consolidated group of companies, including the Loan Parties, (d) the execution and delivery of the Loan Documents, the ABL Loan Documents, agreements governing other Indebtedness of the Borrower and its Subsidiaries not otherwise prohibited hereunder and agreements governing Permitted Holdco Debt, in each case, to which it is a party and the performance of its obligations thereunder, (e) any public offering of its common stock or any other issuance of its Equity Interests or any transaction permitted under Section 7.04, (f) holding any cash or property received in connection with Restricted Payments made by the Borrower in accordance with Section 7.06 pending application thereof by Holdings, (g) providing indemnification to officers and directors and (h) activities incidental to the businesses or activities described in clauses (a) through (g) of this Section.
7.14 Deposit Accounts. Open new DDAs or Blocked Accounts unless the Loan Parties shall have delivered to the Collateral Agent appropriate Blocked Account Agreements consistent with the provisions of Section 6.13, and otherwise satisfactory to the Collateral Agent; provided, however, that Blocked Account Agreements shall not be required for any Excluded Account. No Loan Party shall maintain any bank accounts or enter into any agreements with credit card processors other than the ones expressly contemplated herein or in Section 6.13 hereof.
7.15 Consolidated Fixed Charge Coverage Ratio. During the continuance of a Covenant Compliance Event occurring on or after the last day of the Fiscal Quarter of Holdings ending May 26, 2012, permit the Consolidated Fixed Charge Coverage Ratio to be less than 1.0 to 1.0.
7.16 Sale and Leaseback Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred, provided that Borrower and its Restricted Subsidiaries may become and remain liable as lessee, guarantor or other surety with respect to any such lease if and to the extent that the Borrower or any of its Restricted Subsidiaries would be permitted to enter into, and remain liable under, such lease to the extent that the transaction would be permitted under Section 7.02, assuming the sale and lease back transaction constituted Indebtedness in a principal amount equal to the gross proceeds of the sale and the related sale were permitted under Section 7.05(h).
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
8.01 Events of Default. Any of the following shall constitute an Event of Default:
(a) Non-Payment. The Borrower or any other Loan Party fails to (i) pay when and as required to be paid herein, any amount of principal of any Loan or any L/C Obligation, or deposit any funds as Cash Collateral in respect of L/C Obligations, or (ii) pay within three Business Days after the same becomes due, any interest on any Loan or on any L/C Obligation, or any fee due hereunder, or (iii) pay within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or
(b) Specific Covenants with no Cure Period. (i) Any Loan Party or any of its Restricted Subsidiaries fails to perform or observe any term, covenant or agreement applicable to it contained in any of 6.03(a), 6.05(a) (solely as it relates to the Borrower), 6.07, 6.11, 6.13, or Article VII, or (ii) any of the Loan Parties fails to perform or observe any term, covenant or agreement contained in Section 5.01 of the Security Agreement, or Sections 6.02 or 6.03 of the Pledge Agreement to which it is a party; or
(c) Specific Covenants with Five-Day Cure Period. Any Loan Party or any of its Restricted Subsidiaries fails to perform or observe any term, covenant or agreement applicable to it contained in any of Section 6.01, 6.02, 6.03 (other than clause (a)), 6.05(a) (solely as it relates to any Loan Party or Restricted Subsidiary other than the Borrower), 6.05 (other than clause (a)), 6.12, 6.14, 6.15, or 6.19, and such failure continues for five Business Days; or
(d) Other Defaults. Any Loan Party fails to perform or observe any other covenant or agreement (not specified in Section 8.01(a), (b) or (c) above) contained in
any Loan Document on its part to be performed or observed and such failure continues for 30 days following receipt of notice from the Administrative Agent or the Required Lenders; or
(e) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith (including, without limitation, any Borrowing Base Certificate) shall be incorrect or misleading in any material respect when made or deemed made; or
(f) Cross-Default. (i) Any Loan Party or any Restricted Subsidiary thereof (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) having an aggregate principal amount (including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $10.0 million, or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded; provided that (x) this paragraph (f) shall not apply to 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) the occurrence of an event of default under the Term Facility (other than a payment event of default) shall not constitute an Event of Default under this clause (e)(B) until the earliest of (1) 30 days after the date of such event of default (during which period such event of default is not waived or cured), (2) the acceleration of the obligations under the Term Facility or (3) the exercise of secured creditor remedies by the administrative agent under the Term Facility and/or lenders under the Term Facility as a result of such event of default; or (ii) there occurs under any Swap Contract an Early Termination Date (as defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as to which a Loan Party or any Restricted Subsidiary thereof is the Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which a Loan Party or any Restricted Subsidiary thereof is an Affected Party (as so defined) and, in either event, the Swap Termination Value owed by such Loan Party or such Restricted Subsidiary as a result thereof is greater than $10.0 million; or
(g) Insolvency Proceedings, Etc. Any Loan Party or any 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 or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for 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 60 calendar days, or an order for relief is entered in any such proceeding; or
(h) Inability to Pay Debts; Attachment. (i) Any Loan Party or any Material Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 days after its issue or levy; or
(i) Judgments. There is entered against any Loan Party or any Material Subsidiary and remains unpaid one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding $10.0 million (to the extent not covered by independent third-party insurance as to which the insurer is rated at least A by A.M. Best Company, has been notified of the potential claim and does not dispute coverage) and (i) enforcement proceedings are commenced by any creditor upon such judgment or order, or (ii) there is a period of 30 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or
(j) ERISA. An ERISA Event occurs or any substantially similar event occurs with respect to a Foreign Plan (that would have been an ERISA Event had the Foreign Plan been subject to ERISA and that gives rise to liability under analogous foreign law) which, together with all other ERISA Events (or such substantially similar events with respect to Foreign Plans) that have occurred, has resulted or could reasonably be expected to result in a Material Adverse Effect; or
(k) 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 or satisfaction in full of all the Obligations, ceases to be in full force and effect against Holdings, the Borrower or any Material Subsidiary; or any Loan Party contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any or further liability or obligation under any provision of any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or seeks to avoid, limit or otherwise adversely affect any Lien purported to be created under any Collateral Document; or
(l) Change of Control. There occurs any Change of Control; or
(m) Collateral Documents. Any Collateral Document after delivery thereof pursuant to Article IV, Section 6.12, Section 6.13, or Section 6.19 shall for any reason (other than pursuant to the terms thereof) cease (or shall be asserted by any Loan Party or, in the reasonable discretion of the Administrative Agent, any other Person not) to create a valid and perfected First Priority Lien or Second Priority Lien, as applicable (subject to Liens permitted by Section 7.01), on the Collateral purported to be covered thereby, either (i) with an aggregate fair market value for such Collateral of (A) $10.0 million or more, in the case of Term Priority Collateral, or (B) $5.0 million or more, in the case of ABL Priority Collateral, or (ii) consisting of amounts on deposit with Blocked Account Banks or of the type included in the Borrowing Base in an amount of more than $100,000, for any reason other than the failure of Collateral Agent to maintain control over any Collateral in its possession.
8.02 Remedies upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent may (and at the request of, or with the consent of, the Required Lenders, shall) take any or all of the following actions:
(a) declare the commitment of each Lender to make Loans and any obligation of each L/C Issuer to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Loan Parties;
(c) whether or not the maturity of the Obligations shall have been accelerated pursuant hereto, proceed to protect, enforce and exercise all rights and remedies under this Agreement, any of the other Loan Documents or applicable Law, including, but not limited to, by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations are evidenced, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of the Credit Parties; and
(d) require that the Loan Parties Cash Collateralize the L/C Obligations;
provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Loan Parties to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.
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 and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), or after the commencement of any Liquidation, subject to the terms of the Intercreditor Agreement, any amounts received on account of the Obligations shall be applied (by the Administrative Agent as hereby instructed so to apply) in the following order:
First, to payment in full of that portion of the Obligations (excluding the Other Liabilities) constituting fees, indemnities, Credit Party Expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and the Collateral Agent and amounts payable under Article III) payable to the Administrative Agent and the Collateral Agent, each in its capacity as such;
Second, to payment in full of that portion of the Obligations (excluding the Other Liabilities) constituting indemnities, Credit Party Expenses, and other amounts (other than principal, interest and fees) payable to the Lenders and the L/C Issuers (including fees, charges and disbursements of counsel to the respective Lenders and the L/C Issuers and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them in their capacities as such;
Third, to payment in full to the Swing Line Lender of that portion of the Obligations constituting accrued and unpaid interest on the Swing Line Loans;
Fourth, to payment in full of that portion of the Obligations constituting accrued and unpaid interest on the Loans, L/C Borrowings and other Obligations, and fees (including Letter of Credit Fees), ratably among the Lenders and the L/C Issuers in proportion to the respective amounts described in this clause Fourth payable to them in their capacities as such;
Fifth, to payment in full to the Swing Line Lender of that portion of the Obligations constituting unpaid principal of the Swing Line Loans;
Sixth, to payment in full of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, ratably among the Lenders and the L/C Issuers in proportion to the respective amounts described in this clause Sixth held by them in their capacities as such;
Seventh, to the Administrative Agent for the account of the L/C Issuers, to Cash Collateralize in full that portion of L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit;
Eighth, to payment in full of that portion of the Obligations arising from Cash Management Services, ratably among the Credit Parties in proportion to the respective amounts described in this clause Eighth held by them;
Ninth, to payment in full of all other Obligations (including without limitation those arising from Bank Products), ratably among the Credit Parties in proportion to the respective amounts described in this clause Ninth held by them; and
Last, the balance, if any, after all of the Obligations have been paid in full, to the applicable Loan Parties or as otherwise required by Law.
Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Seventh above shall be applied to satisfy drawings under such Letters of Credit as they occur. If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above.
ARTICLE IX
ADMINISTRATIVE AGENT
9.01 Appointment and Authority.
(a) Each of the Lenders and each L/C Issuer hereby irrevocably appoints JPMCB to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuers, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.
(b) The Administrative Agent shall also act as the Collateral Agent under the Loan Documents, and each of the Lenders (in its capacities as a Lender), Swing Line Lender (if applicable) and each L/C Issuer hereby irrevocably appoints and authorizes the Collateral Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Collateral Agent and any co-agents, sub-agents and attorneys-in-fact appointed by the Collateral Agent pursuant to Section 9.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Agents, shall be entitled to the benefits of all provisions of this Article IX and Article XI (including Section 11.04(c), as though such co-agents, sub-agents and attorneys-in-fact were the Collateral Agent under the Loan Documents) as if set forth in full herein with respect thereto.
(c) Each of the Lenders, for itself and on behalf of any of its Affiliates, and each L/C Issuer hereby irrevocably appoints JPMCB, in its capacity as Administrative Agent and Collateral Agent, to act as its agent under the Intercreditor Agreement and authorizes JPMCB, in its capacity as Administrative Agent and Collateral Agent, to execute the Intercreditor Agreement on its behalf and to take such actions on its behalf and to exercise such powers as are delegated to JPMCB, in its capacity as Administrative Agent and Collateral Agent, by the terms hereof and thereof, together with such actions and powers as are reasonably incidental thereto.
9.02 Rights as a Lender. The Person serving as the Administrative Agent and Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent or the Collateral Agent and the term Lender or Lenders shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent and Collateral 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 the Administrative Agent or the Collateral Agent hereunder and without any duty to account therefor to the Lenders.
9.03 Exculpatory Provisions. The Agents shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Agents:
(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent or Collateral Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent and the Collateral Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent or the Collateral Agent to liability or that is contrary to any Loan Document or applicable 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 its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or the Collateral Agent or any of its Affiliates in any capacity.
The Agents shall not be liable for any action taken or not taken by them (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 Agents shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.01 and 8.02) or (ii) in the absence of their own gross negligence or willful misconduct. The Agents 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, a Lender or any L/C Issuer.
The Agents shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or
therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Collateral Documents, (v) the value or the sufficiency of any Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agents.
9.04 Reliance by Agents. The Agents 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 them to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agents also may rely upon any statement made to them orally or by telephone and believed by them to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the L/C Issuers, the Administrative Agent may presume that such condition is satisfactory to such Lender or such L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or such L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit. The Agents may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by them, and shall not be liable for any action taken or not taken by them in accordance with the advice of any such counsel, accountants or experts.
9.05 Delegation of Duties. The Agents may perform in any and all of their duties and exercise their rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent or the Collateral Agent, as applicable. The Agents and any such sub-agent may perform any and all of their duties and exercise their rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Agents and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facility provided for herein as well as activities as Administrative Agent or Collateral Agent.
9.06 Resignation of Agents. The Agents may at any time give notice of its resignation to the Lenders, the L/C Issuers and the Borrower, including the effective date of such resignation which may be not less than 30 days from the date of such notice. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower at all times other than during the existence of an Event of Default (which consent shall not be unreasonably withheld or delayed), to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Agents give notice of their resignation, then the retiring Agents may on behalf of the Lenders and the L/C Issuers, appoint a successor Administrative Agent and Collateral Agent meeting the qualifications set forth above; provided that if the Agents shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in
accordance with such notice and (a) the retiring Agents shall be discharged from their duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Collateral Agent on behalf of the Lenders or the L/C Issuers under any of the Loan Documents, the retiring Collateral Agent shall continue to hold such collateral security until such time as a successor Collateral Agent is appointed) and (b) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and each L/C Issuer directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section 9.06. Upon the acceptance of a successors appointment as Administrative Agent and Collateral Agent hereunder, 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 Collateral Agent, and the retiring Administrative Agent and Collateral Agent shall be discharged from all of their respective duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section 9.06). 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 or Collateral Agents resignation hereunder and under the other Loan Documents, the provisions of this Article IX and Section 11.04 shall continue in effect for the benefit of such retiring Administrative Agent and Collateral Agent, their respective sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent and Collateral Agent was acting as Administrative Agent and Collateral Agent.
9.07 Non-Reliance on Agents and Other Lenders. Each Lender and each L/C Issuer acknowledges that it has, independently and without reliance upon the Agents, the Arrangers or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and each L/C Issuer also acknowledges that it will, independently and without reliance upon the Agents, the Arrangers or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. Except as provided in Section 9.12, the Agents and the Arrangers shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of any Loan Party that may come into the possession of the Agents and the Arrangers.
9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, no Arranger or Syndication Agent listed on the cover page hereof shall (i) have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent, the Collateral Agent, a Lender or any L/C Issuer hereunder or (ii) any fiduciary relationship with the Lenders, the Borrower or any other Person pursuant to the Loan Documents.
9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C
Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the 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, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuers and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the L/C Issuers and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the L/C Issuers and the Administrative Agent under Sections 2.07, and 11.04) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and each L/C Issuer to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the L/C Issuers, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.07 and 11.04.
Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or any L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or any L/C Issuer to authorize the Administrative Agent to vote in respect of the claim of any Lender or any L/C Issuer in any such proceeding.
9.10 Collateral and Guaranty Matters. The Lenders and the L/C Issuers irrevocably authorize the Agents, at their option and in their discretion,
(a) to release any Lien on any property granted to or held by the Collateral Agent under any Loan Document (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (A) contingent indemnification obligations for which no claim has then been asserted, (B) obligations and liabilities under Cash Management Services and (C) obligations and liabilities under Bank Products) and the expiration or termination of all Letters of Credit, (ii) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document to a Person that is not a Loan Party, or (iii) if approved, authorized or ratified in writing in accordance with Section 11.01;
(b) to release any Guarantor from its obligations hereunder if such Person ceases to be a Restricted Subsidiary as a result of a transaction permitted hereunder; and
(c) to subordinate any Lien on any property granted to or held by the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(i).
Upon request by the Agents at any time, the Required Lenders will confirm in writing the Agents authority to release or subordinate their interest in particular types or items of property, or to release any Guarantor from its obligations hereunder pursuant to this Section 9.10. In each case as specified in this Section 9.10, the Administrative Agent or the Collateral Agent, as applicable, will, at the Borrowers expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations hereunder, in each case in accordance with the terms of the Loan Documents and this Section 9.10.
9.11 Notice of Transfer. The Agents may deem and treat a Lender party to this Agreement as the owner of such Lenders portion of the Obligations for all purposes, unless and until, and except to the extent, an Assignment and Assumption shall have become effective as set forth in Section 11.06.
9.12 Reports and Financial Statements. By signing this Agreement, each Lender:
(a) agrees to furnish the Administrative Agent on the first day of each month with a summary of all Other Liabilities, if any, due or to become due to such Lender;
(b) is deemed to have requested that the Administrative Agent furnish such Lender, promptly after they become available, copies of all Borrowing Base Certificates, financial statements required to be delivered by the Borrower hereunder and all collateral field examinations and appraisals of the Collateral received by the Agents (collectively, the Reports), and the Administrative Agent further agrees to deliver other information delivered pursuant to Section 6.02 upon the reasonable request of such Lender;
(c) expressly agrees and acknowledges that the Agents (i) make no representation or warranty as to the accuracy of the Reports, and (ii) shall not be liable for any information contained in any Report;
(d) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that the Agents or any other party performing any audit or examination will inspect only specific information regarding the Loan Parties and will rely significantly upon the Loan Parties books and records, as well as on representations of the Loan Parties personnel;
(e) agrees to keep all Reports confidential in accordance with the provisions of Section 11.07, or use any Report in any other manner; and
(f) without limiting the generality of any other indemnification provision contained in this Agreement, agrees: (i) to hold the Agents and any such other Lender
preparing a Report harmless from any action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from any Report in connection with any Credit Extensions that the indemnifying Lender has made or may make to the Borrower, or the indemnifying Lenders participation in, or the indemnifying Lenders purchase of, a Loan or Loans of the Borrower; and (ii) to pay and protect, and indemnify, defend, and hold the Agents and any such other Lender preparing a Report harmless from and against, the claims, actions, proceedings, damages, costs, expenses, and other amounts (including attorney costs) incurred by the Agents and any such other Lender preparing a Report as the direct or indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.
9.13 Agency for Perfection. Each Lender hereby appoints each other Lender as agent for the purpose of perfecting Liens for the benefit of the Agents and the Lenders, in assets which, in accordance with Article 9 of the UCC or any other applicable Law can be perfected only by possession. Should any Lender (other than the Agents) obtain possession of any such Collateral, such Lender shall notify the Agents 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.
9.14 Indemnification of Agents. The Lenders agree to indemnify the Agents (to the extent not reimbursed by the Loan Parties and without limiting the obligations of Loan Parties hereunder), ratably according to their respective Applicable Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any Agent in any way relating to or arising out of this Agreement or any other Loan Document or any action taken or omitted to be taken by any Agent in connection therewith; provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agents gross negligence or willful misconduct as determined by a final and nonappealable judgment of a court of competent jurisdiction.
9.15 Withholding Tax. To the extent required by any applicable law, the Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the Internal Revenue Service or any other authority of the United States or other jurisdiction asserts a claim that the Agent did not properly withhold Tax from amounts paid to or for the account of any 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 Agent of a change in circumstance that rendered the exemption from, or reduction of withholding Tax ineffective), such Lender shall indemnify and hold harmless the Agent (to the extent that the Agent has not already been reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) for all amounts paid, directly or indirectly, by the Agent as Tax or otherwise, including any interest, additions to Tax or penalties thereto, together with all expenses incurred, including legal expenses and any other out-of-pocket expenses, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.
9.16 Relation Among Lenders. The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Agents) authorized to act for, any other Lender.
ARTICLE X
CONTINUING GUARANTY
10.01 Guaranty. Each Guarantor hereby absolutely and unconditionally guarantees, as a guaranty of payment and performance and not merely as a guaranty of collection, prompt payment when due, whether at stated maturity, by required prepayment, upon acceleration, demand or otherwise, and at all times thereafter, of any and all of the Obligations, whether for principal, interest, premiums, fees, indemnities, damages, costs, expenses or otherwise, of the Borrower to the Credit Parties, arising hereunder and under the other Loan Documents (including all renewals, extensions, amendments, refinancings and other modifications thereof and all costs, attorneys fees and expenses incurred by the Credit Parties in connection with the collection or enforcement thereof). The Administrative Agents books and records showing the amount of the Obligations shall be admissible in evidence in any action or proceeding, and shall be binding upon each Guarantor, and conclusive for the purpose of establishing the amount of the Obligations. This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any instrument or agreement evidencing any Obligations, or by the existence, validity, enforceability, perfection, non-perfection or extent of any collateral therefor, or by any fact or circumstance relating to the Obligations which might otherwise constitute a defense to the obligations of any Guarantor under this Guaranty, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to any or all of the foregoing.
10.02 Rights of Lenders. Each Guarantor consents and agrees that the Credit Parties may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness hereof: (a) amend, extend, renew, compromise, discharge, accelerate or otherwise change the time for payment or the terms of the Obligations or any part thereof; (b) take, hold, exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any security for the payment of this Guaranty or any Obligations; (c) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Lenders in their sole discretion may determine; and (d) release or substitute one or more of any endorsers or other guarantors of any of the Obligations. Without limiting the generality of the foregoing, each Guarantor consents to the taking of, or failure to take, any action which might in any manner or to any extent vary the risks of such Guarantor under this Guaranty or which, but for this provision, might operate as a discharge of such Guarantor.
10.03 Certain Waivers. Each Guarantor waives (a) any defense arising by reason of any disability or other defense of the Borrower or any other Guarantor, or the cessation from any cause whatsoever (including any act or omission of any Credit Party) of the liability of the Borrower; (b) any defense based on any claim that such Guarantors obligations exceed or are more burdensome than those of the Borrower; (c) the benefit of any statute of limitations affecting such Guarantors liability hereunder; (d) any right to proceed against the Borrower, proceed against or exhaust any security for the Obligations, or pursue any other remedy in the power of any Credit Party whatsoever; (e) any benefit of and any right to participate in any
security now or hereafter held by any Credit Party; and (f) to the fullest extent permitted by law, any and all other defenses or benefits that may be derived from or afforded by applicable law limiting the liability of or exonerating guarantors or sureties. Each Guarantor expressly waives all setoffs and counterclaims and all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Obligations, and all notices of acceptance of this Guaranty or of the existence, creation or incurrence of new or additional Obligations. As provided below, this Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York.
10.04 Obligations Independent. The obligations of each Guarantor hereunder are those of primary obligor, and not merely as surety, and are independent of the Obligations and the obligations of any other guarantor, and a separate action may be brought against each Guarantor to enforce this Guaranty whether or not the Borrower or any other person or entity is joined as a party.
10.05 Subrogation. No Guarantor shall exercise any right of subrogation, contribution, indemnity, reimbursement or similar rights with respect to any payments it makes under this Guaranty until all of the Obligations (other than any indemnity obligations for unasserted claims that by its terms survives the termination of this Agreement) and any amounts payable under this Guaranty have been paid and performed in full and the Commitments and the Facility are terminated. If any amounts are paid to any Guarantor in violation of the foregoing limitation, then such amounts shall be held in trust for the benefit of the Credit Parties and shall forthwith be paid to the Credit Parties to reduce the amount of the Obligations, whether matured or unmatured.
10.06 Termination; Reinstatement. This Guaranty is a continuing and irrevocable guaranty of all Obligations now or hereafter existing and shall remain in full force and effect until all Obligations and any other amounts payable under this Guaranty are paid in full in cash (other than any indemnity obligations for unasserted claims that by its terms survives the termination of this Agreement) and the Commitments and the Facility with respect to the Obligations are terminated. Notwithstanding the foregoing, this Guaranty shall continue in full force and effect or be revived, as the case may be, if any payment by or on behalf of the Borrower or any Guarantor is made, or any of the Credit Parties exercises its right of setoff, in respect of the Obligations 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 any of the Credit Parties in their discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Laws or otherwise, all as if such payment had not been made or such setoff had not occurred and whether or not the Credit Parties are in possession of or have released this Guaranty and regardless of any prior revocation, rescission, termination or reduction. The obligations of each Guarantor under this paragraph shall survive termination of this Guaranty.
10.07 Subordination. Each Guarantor hereby subordinates the payment of all obligations and indebtedness of the Borrower owing to such Guarantor, whether now existing or hereafter arising, including but not limited to any obligation of the Borrower to any Guarantor as subrogee of the Credit Parties or resulting from such Guarantors performance under this
Guaranty, to the indefeasible payment in full in cash of all Obligations (other than any indemnity obligations for unasserted claims that by its terms survives the termination of this Agreement). If the Credit Parties so request, any such obligation or indebtedness of the Borrower to any Guarantor shall be enforced and performance received by such Guarantor as trustee for the Credit Parties and the proceeds thereof shall be paid over to the Credit Parties on account of the Obligations, but without reducing or affecting in any manner the liability of such Guarantor under this Guaranty.
10.08 Stay of Acceleration. If acceleration of the time for payment of any of the Obligations is stayed, in connection with any case commenced by or against any Guarantor or the Borrower under any Debtor Relief Laws, or otherwise, all such amounts shall nonetheless be payable by such Guarantor immediately upon demand by the Credit Parties.
10.09 Condition of Borrower. Each Guarantor acknowledges and agrees that it has the sole responsibility for, and has adequate means of, obtaining from the Borrower and any other guarantor such information concerning the financial condition, business and operations of the Borrower and any such other Guarantor as such Guarantor requires, and that none of the Credit Parties has any duty, and such Guarantor is not relying on the Credit Parties at any time to disclose to such Guarantor any information relating to the business, operations or financial condition of the Borrower or any other Guarantor (such Guarantor waiving any duty on the part of the Credit Parties to disclose such information and any defense relating to the failure to provide the same).
ARTICLE XI
MISCELLANEOUS
11.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall:
(a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender (it being understood that the waiver of any mandatory prepayment shall not constitute an extension or increase of any Commitment of any Lender);
(b) postpone any date fixed by this Agreement, Incremental Assumption Agreement or any other Loan Document for (i) any payment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any of the other Loan Documents without the written consent of each Lender entitled to such payment (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, or (ii) any scheduled or mandatory reduction of the Aggregate Commitments hereunder or under any other Loan Document without the
written consent of each Lender; provided that any Lender, upon the request of the Borrower, may extend the final expiration of its Commitment without the consent of any other Lender in accordance with Section 2.16;
(c) reduce the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing, or (subject to clause (iv) of the second proviso to this Section 11.01) any fees or other amounts payable hereunder or under any other Loan Document, without the written consent of each Lender entitled to such amount; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of Default Rate or to waive any obligation of the Borrower to pay interest or Letter of Credit Fees at the Default Rate; provided further, however, changes to interest rates arising from changes to the definition of Borrowing Base shall be governed by clause (i) below;
(d) change Section 2.13 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;
(e) change any provision of this Section 11.01 or the definition of Required Lenders or Supermajority Lenders or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender (other than any Defaulting Lender);
(f) except as expressly permitted hereunder, release, or limit the liability of, any Loan Party without the written consent of each Lender (other than any Defaulting Lender);
(g) except for releases of Collateral in accordance with the provisions of Section 9.10 hereof (in which case, such release may be made by the Administrative Agent acting alone), release all or substantially all of the Collateral from the Liens of the Collateral Documents in any transaction or series of related transactions, without the written consent of each Lender (other than any Defaulting Lender);
(h) except pursuant to Section 2.15, increase the Aggregate Commitments without the written consent of each Lender (other than any Defaulting Lender);
(i) change the definition of the term Borrowing Base or any component definition thereof if as a result thereof the amounts available to be borrowed by the Borrower would be increased, without the written consent of the Supermajority Lenders, provided that the foregoing shall not limit the discretion of the Administrative Agent to change, establish or eliminate any Reserves without the consent of any Lender;
(j) modify the definition of Permitted Overadvance so as to increase the amount thereof or, except as provided in such definition, the time period for a Permitted Overadvance without the written consent of the Supermajority Lenders;
(k) except as provided in Section 9.10(c), subordinate the Obligations hereunder or the Liens granted hereunder or under the other Loan Documents, to any
other Indebtedness or Lien, as the case may be without the written consent of each Lender (other than any Defaulting Lender);
(l) modify this Section 11.01 or Section 8.03 without the written consent of each Lender (other than any Defaulting Lender);
and provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the L/C Issuers in addition to the Lenders required above, affect the rights or duties of the L/C Issuers under this Agreement or any Issuer Document relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) 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 the Administrative Agent under this Agreement or any other Loan Document; (iv) no amendment, waiver or consent shall, unless in writing and signed by the Collateral Agent in addition to the Lenders required above, affect the rights or duties of the Collateral Agent under this Agreement or any other Loan Document; and (v) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.
If any Lender does not consent to a proposed amendment, waiver, consent or release with respect to any Loan Document that requires the consent of each Lender or Supermajority Lenders and that has been approved by the Required Lenders, the Borrower may replace such non-consenting Lender in accordance with Section 11.13; provided that such amendment, waiver, consent or release can be effected as a result of the assignment contemplated by such Section (together with all other such assignments required by the Borrower to be made pursuant to this paragraph).
Notwithstanding anything to the contrary herein contained, no provider of any Bank Product or Cash Management Service in its capacity as such (a) shall have any right to consent to any amendment, modification, termination or waiver of this Agreement or any other Loan Document (including any amendment and/or restatement of this Agreement and the other Loan Documents refinancing, replacing or restructuring the Loans and the Obligations including any increase thereof) or to contest any such amendment, modification, termination or waiver, (b) shall be deemed a Lender for any purposes of the Loan Documents, or (c) shall have any right to (i) enforce any security interest, right or remedy under any of the Loan Documents or (ii) instruct the Agents with respect to any action or inaction by the Agents with respect to the exercise of any rights or remedies under the Loan Documents or at law or equity, or consent to or contest any such action or inaction. Except for the payment of amounts on account of Bank Products and Cash Management Services (but only to the extent the Agents shall have received sufficient funds therefor), the Agents shall have no duties or obligations to provider of any Bank Product or Cash Management Services in its capacity as such. The provisions of this paragraph shall survive the assignment by any Lender of its Loans and Commitments.
Notwithstanding anything to the contrary contained in this Section 11.01, 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 any Loan Document, then the Administrative Agent and/or the Collateral Agent (acting in their 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.
11.02 Notices; Effectiveness; Electronic Communications.
(a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:
(i) if to Holdings, the Borrower, any Loan Party, the Administrative Agent, the Collateral Agent, the L/C Issuers or the Swing Line Lender to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 11.02; and
(ii) if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire.
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier 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 delivered through electronic communications to the extent provided in subsection (b) below shall be effective as provided in such subsection (b).
(b) Electronic Communications. Notices and other communications to the Lenders and the L/C Issuers hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or any L/C Issuer pursuant to Article II if such Lender or such L/C Issuer, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
Unless the 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.
(c) The Platform. THE PLATFORM IS PROVIDED AS IS AND AS AVAILABLE. THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the Agent Parties) have any liability to Holdings or any of its Subsidiaries, 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 Borrowers 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 nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to Holdings or any of its Subsidiaries, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
(d) Change of Address, Etc. Each of the Borrower, any other Loan Party, and the Administrative Agent may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower, the Administrative Agent, the L/C Issuers and the Swing Line Lender. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier 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.
(e) Reliance by Administrative Agent and Lenders. The Administrative Agent, the Collateral Agent, the L/C Issuers, the Swing Line Lender and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices, Swing Line Loan Notices, and Conversion/Continuation 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, the Collateral Agent, the L/C Issuers, the Swing Line Lender, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the 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.
11.03 No Waiver; Cumulative Remedies. No failure by any Lender, any L/C Issuer, the Administrative Agent or the Collateral Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder 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.
11.04 Expenses; Indemnity; Damage Waiver.
(a) Costs and Expenses. The Loan Parties shall pay all Credit Party Expenses within ten (10) Business Days after receipt of an invoice therefor.
(b) Indemnification by the Loan Parties. The Loan Parties shall indemnify the Administrative Agent (and any sub-agent thereof), the Collateral Agent, the Arrangers, the joint bookrunning managers, each Lender, each L/C Issuer and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable and documented in reasonable detail fees, charges and disbursements 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 material to the interests of the Lenders, in each case, selected by the Administrative Agent and solely in the case of an actual conflict of interest between Indemnitees where the Indemnitees affected by such conflict inform the Borrower of such conflict, one additional counsel in each relevant jurisdiction material to the interest of the Lenders to each group of affected Indemnitees taken as a whole) incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the preparation, execution, delivery or administration of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby or any amendment or waiver with respect hereto or thereto, the performance by the parties
hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by any L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release or threat of Release of Hazardous Materials, at, under, on or from any property or facility currently or formerly owned, leased or operated by Holdings or any of its Subsidiaries, or any Environmental Liability related in any way to Holdings or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee (y) result from a claim brought by the Borrower or any other Loan Party against an Indemnitee for breach in bad faith of such Indemnitees obligations hereunder or under any other Loan Document, if the Borrower or such Loan Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction, or (z) result from the presence, Release or threat of Release of Hazardous Materials or violations of Environmental Laws first occurring or first existing after completion of the foreclosure upon the Collateral, granting of a deed-in-lieu of foreclosure with respect to the Collateral or similar transfer of title or possession of the Collateral, unless such presence, release or violation is actually caused by any Loan Party or any Subsidiary thereof. This Section 11.04(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims or damages arising from any non-Tax claim.
(c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Agents (or any sub-agent thereof), the Swing Line Lender, the L/C Issuers or any Related Party of any of the foregoing, each Lender (other than the Swing Line Lender in its capacity as such) severally agrees to pay to the Administrative Agent (or any such sub-agent), the Collateral Agent, the Swing Line Lender, the L/C Issuers or such Related Party, as the case may be, such Lenders Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent), the Collateral Agent, the Swing Line Lender or L/C Issuer in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) or the Collateral Agent in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.12(d).
(d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable law, the Loan Parties shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.
(e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after receipt of an invoice or demand therefor.
(f) Survival. The agreements in this Section shall survive the resignation of the Agents, the Swing Line Lender and the L/C Issuers, the replacement of any Lender, any Lender ceasing to be a Lender pursuant to the last sentence of Section 2.16(b), the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.
11.05 Payments Set Aside. To the extent that any payment by or on behalf of any of the Loan Parties is made to the Administrative Agent, any L/C Issuer or any Lender, or the Administrative Agent, any L/C Issuer or any Lender exercises 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 the Administrative Agent, such L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and each L/C Issuer severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the L/C Issuers under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
11.06 Successors and Assigns.
(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Loan Party may 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 except (i) to an assignee in accordance with the provisions of Section 11.06(b), (ii) by way of participation in accordance with the provisions of Section 11.06(d), or (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 11.06(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuers 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 Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment(s) and the Loans (including for purposes of this Section 11.06(b), participations in L/C Obligations and in Swing Line 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, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if Trade Date is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $1.0 million (and in integral multiples of $1.0 million in excess thereof) and after giving effect thereto, the assigning Lender shall hold a Commitment of at least $1.0 million, unless, in each case, each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met;
(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lenders rights and obligations under this Agreement with respect to the Loans or the Commitment assigned, except that (A) this clause (ii) shall not apply to the Swing Line Lenders rights and obligations in respect of Swing Line Loans and (B) this clause (ii) shall not limit the right of a Lender to assign all or any portion of its Commitment;
(iii) Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:
(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; and
(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (1) any Commitment if such assignment is to a Person that is not a Lender with a Commitment, an Affiliate of Lender or an Approved Fund with respect to such Lender or (2) any Loan to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund;
(C) the consent of the L/C Issuers (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding); and
(D) the consent of the Swing Line Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Swing Line Loans (whether or not then outstanding).
(iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any Tax forms required by Section 3.01(g) or (h);
(v) No Assignment to Borrower. No such assignment shall be made to the Borrower or any of the Borrowers Affiliates or Subsidiaries; and
(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural person.
Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning 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 and 11.04 with respect to facts and circumstances occurring prior to the effective date of such assignment). Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 11.06(d).
(c) Register. 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 and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal and interest amounts of the Loans (and whether such Loan is a Committed Loan, an Extended Loan or a Swing Line Loan, as applicable) owing to, each Lender pursuant to the terms hereof from time to time (the Register). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.
The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d) Participations. 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 or the Borrower or any of the Borrowers Affiliates or Subsidiaries) (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, including, for avoidance of doubt, any indemnification obligation with respect to the participated interest, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the 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 to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in clauses (a), (b), (c), (f) and (g) in the first proviso to
Section 11.01 that affects such Participant. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 (provided such Participant (x) agrees to be subject to the limitations and requirements therein as though it were a Lender, and (y) in the case of a recipient that would be a Fee Recipient shall satisfy the requirements for being a Permitted Investor) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.06(b) and (iv) any Person that would be a Fee Recipient may not be a Participant unless such Person is a Permitted Investor. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.11 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal and interest amount of each Participants interest in the Loans held by it (the Participant Register); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register to any Person (including the identity of any Participant or any information relating to a Participants interest in any Commitments, Loans, Letters of Credit or its other obligations under the Loan Documents) except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement notwithstanding any notice to the contrary.
(e) Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant except to the extent that such entitlement to any greater payment results from any Change in Law after the Participant becomes a Participant, or the sale of the participation to such Participant is made with the Borrowers prior written consent.
(f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or any central bank having jurisdiction over such Lender; 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) Electronic Execution of Assignments. The words execution, signed, signature, and words of like import in any Assignment and Assumption 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.
(h) Resignation as L/C Issuer or Swing Line Lender After Assignment. Notwithstanding anything to the contrary contained herein, if at any time JPMCB assigns all of its Commitment and Loans pursuant to subsection (b) above, JPMCB may, (i) upon 30 days notice to the Borrower and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days notice to the Borrower, resign as Swing Line Lender. In the event of any such resignation as L/C Issuer or Swing Line Lender, the Borrower shall be entitled to appoint from among the Lenders a successor L/C Issuer or Swing Line Lender hereunder; provided, however, that no failure by the Borrower to appoint any such successor shall affect the resignation of JPMCB as L/C Issuer or Swing Line Lender, as the case may be. If JPMCB resigns as L/C Issuer, it shall retain all the rights, powers, privileges and duties of the L/C Issuers hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Committed Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)). If JPMCB resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Committed Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c). Upon the appointment of a successor L/C Issuer and/or Swing Line Lender, (A) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer or Swing Line Lender, as the case may be, and (B) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to JPMCB to effectively assume the obligations of JPMCB with respect to such Letters of Credit.
11.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent, the Lenders and the L/C Issuers agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates respective partners, directors, officers, employees, agents, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 11.07, 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 (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, or (iii) any funding or financing source of any Lender, (g) with the consent of the Borrower or (h) to the extent such Information (i)
becomes publicly available other than as a result of a breach of this Section 11.07 or (ii) becomes available to the Administrative Agent, any Lender, any L/C Issuer or any of their respective Affiliates on a non-confidential basis from a source other than the Borrower.
For purposes of this Section, Information means all information received from any Loan Party or any Subsidiary thereof relating to any Loan Party or any Subsidiary thereof or their respective businesses, operations, assets and related matters, other than any such information that is available to the Administrative Agent, any Lender or any L/C Issuer on a non-confidential basis prior to disclosure by any Loan Party or any Subsidiary thereof, provided that, in the case of information received from a Loan Party or any such Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
Each of the Administrative Agent, the Lenders and the L/C Issuers acknowledges that (A) the Information may include material non-public information concerning Holdings or a Subsidiary, as the case may be, (B) it has developed compliance procedures regarding the use of material non-public information and (C) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.
11.08 Right of Setoff. If an Event of Default shall have occurred and be continuing, each Credit Party and each of its respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to setoff 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 Credit Party or any such Affiliate to or for the credit or the account of the Borrower or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Credit Party, irrespective of whether or not such Credit Party shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower or such Loan Party may be contingent or unmatured or are owed to a branch or office of such Credit Party different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Credit Party and their respective Affiliates under this Section 11.08 are in addition to other rights and remedies (including other rights of setoff) that such Credit Party or their respective Affiliates may have. Each Credit Party 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.
11.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the Maximum Rate). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender
exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.
11.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement 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 telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
11.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Obligation (other than any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement) shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
11.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
11.13 Replacement of Lenders. (a) If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or (b) if any Lender is a Defaulting Lender, or (c) if in connection with a proposed amendment, modification, waiver, or consent with respect to any of the provisions hereof as contemplated by Section 11.01, the consent of the Required Lenders shall have been obtained but the consent of one or more of such other Lenders whose consent is required shall not have been obtained, or (d) if 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, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:
(e) the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 11.06(b);
(f) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 3.05) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(g) 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; and
(h) such assignment does not conflict with applicable Laws.
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.
11.14 Governing Law; Jurisdiction; Etc.
(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
(b) SUBMISSION TO JURISDICTION. EACH OF THE BORROWER AND EACH OTHER LOAN PARTY 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 COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR 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. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT ANY CREDIT PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) WAIVER OF VENUE. EACH OF THE BORROWER AND EACH OTHER LOAN PARTY 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. 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.
(d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
11.15 WAIVER OF JURY TRIAL. 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.
11.16 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower and Holdings each acknowledge and agree, and acknowledge their respective Affiliates understanding, that: (a) the arranging and other services regarding this Agreement provided by the Administrative Agent, the Arrangers and the Lenders are arms-length commercial transactions between the Borrower,
Holdings and their respective Affiliates, on the one hand, and the Administrative Agent, the Arrangers and the Lenders, on the other hand, (b) each of the Borrower and Holdings and each other Loan Party has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (c) the Borrower and Holdings and each other Loan Party is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (d) the Administrative Agent, each Arranger and each Lender each 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 (e) neither the Administrative Agent nor any Arranger or 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 (f) the Administrative Agent, the Arrangers and the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, Holdings and their respective Affiliates, and neither the Administrative Agent nor the Arrangers or the Lenders have any obligation to disclose any of such interests to the Borrower, Holdings and 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 Administrative Agent, the Arrangers and the Lenders with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
11.17 USA PATRIOT Act Notice. 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. No part of the proceeds of the Loans will be used by the Loan Parties, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.
11.18 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
11.19 Attachments. The exhibits, schedules and annexes attached to this Agreement are incorporated herein and shall be considered a part of this Agreement for the purposes stated herein, except that in the event of any conflict between any of the provisions of such exhibits and the provisions of this Agreement, the provisions of this Agreement shall prevail.
11.20 Intercreditor Agreement. Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent pursuant to this Agreement or the other Loan Documents and the exercise of any right or remedy by the Collateral Agent hereunder or under the other Loan Documents are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and this Agreement, the terms of the Intercreditor Agreement shall govern and control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
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THE CONTAINER STORE, INC., as Borrower | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS HOLDINGS, INC., as Holdings and as a Guarantor | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS GIFT CARD SERVICES, LLC, | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS INSTALLATION SERVICES, LLC, | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
[SIGNATURE PAGE TO ABL CREDIT AGREEMENT THE CONTAINER STORE, INC.]
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JPMORGAN CHASE BANK, N.A., | |
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as Administrative Agent, Collateral Agent, and as Lender | |
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By: |
/s/ Andrew Ray |
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Name: |
Andrew Ray |
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Title: |
Authorized Officer |
[SIGNATURE PAGE TO ABL CREDIT AGREEMENT THE CONTAINER STORE, INC.]
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J.P. MORGAN SECURITIES LLC, | |
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as Joint Lead Arranger and Joint Bookrunning Manager | |
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By: |
/s/ Kirk Stites |
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Name: |
Kirk Stites |
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Title: |
Director |
[SIGNATURE PAGE TO ABL CREDIT AGREEMENT THE CONTAINER STORE, INC.]
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WELLS FARGO BANK, NATIONAL ASSOCIATION, | |
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as Syndication Agent and as Lender | |
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By: |
/s/ Y. Sonia Anandraj |
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Name: Y. Sonia Anandraj |
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Title: Authorized Officer |
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WELLS FARGO CAPITAL FINANCE, LLC, | |
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as Joint Lead Arranger and Joint Bookrunning Manager | |
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By: |
/s/ Y. Sonia Anandraj |
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Name: Y. Sonia Anandraj |
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Title: AVP |
[SIGNATURE PAGE TO ABL CREDIT AGREEMENT THE CONTAINER STORE, INC.]
DISCLOSURE SCHEDULES
to the
CREDIT AGREEMENT
$75,000,000
Dated as of April 6, 2012
among
THE CONTAINER STORE, INC.,
as Borrower,
THE GUARANTORS PARTY HERETO
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent and Collateral Agent,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Syndication Agent,
and
THE OTHER LENDERS PARTY HERETO
J.P. MORGAN SECURITIES LLC and
WELLS FARGO CAPITAL FINANCE, LLC,
as Joint Lead Arrangers
J.P. MORGAN SECURITIES LLC and
WELLS FARGO CAPITAL FINANCE, LLC,
as Joint Bookrunning Managers
Reference is hereby made to that certain Credit Agreement (the Credit Agreement) dated as of April 6, 2012, among THE CONTAINER STORE, INC. (the Borrower or TCS), the Guarantors party thereto, each lender from time to time party thereto (collectively, the Lenders and individually, a Lender), JPMORGAN CHASE BANK, N.A. (JPMorgan), as Administrative Agent and Collateral Agent, J.P. MORGAN SECURITIES LLC and WELLS FARGO CAPITAL FINANCE, LLC, as Joint Lead Arrangers, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Syndication Agent. Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreement.
These Disclosure Schedules are qualified in their entirety by reference to specific provisions of the Credit Agreement, and are not intended to constitute, and shall not be construed as constituting, representations or warranties of the Credit Parties or any other Person except as and to the extent provided in the Credit Agreement.
Any disclosure made in one Disclosure Schedule is deemed to be a disclosure in each other Disclosure Schedule in which it is relevant, whether or not specifically mentioned in such other Disclosure Schedule, and is otherwise deemed to be disclosed for all purposes of the Credit Agreement. The disclosure of any matter in any Disclosure Schedule shall not be deemed to constitute an admission by any Credit Party or to otherwise imply that any such matter is material to any Credit Party for the purposes of the Credit Agreement.
Matters reflected in these Disclosure Schedules are not necessarily limited to matters required by the Credit Agreement to be reflected in these Disclosure Schedules. Any such additional matters are set forth for information purposes and do not necessarily include other matters of similar nature.
Headings have been inserted on the sections in these Disclosure Schedules for convenience of referral only and shall to no extent have the effect of amending or changing the express description of the sections as set forth in the Credit Agreement.
Schedule 2.01
Commitments and Applicable Percentages
Lender |
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Commitment |
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Applicable |
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JPMorgan Chase Bank, N.A. |
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$ |
37,500,000.00 |
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50.00 |
% |
Wells Fargo Bank, National Association |
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$ |
37,500,000.00 |
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50.00 |
% |
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| |
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$ |
75,000,000.00 |
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100.00 |
% |
Schedule 2.03(m)
Existing Letters of Credit
JPM Reference |
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Beneficiary Name |
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LC Amount |
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Issue Date |
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Expiry Date |
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CTCS-349202 |
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FEDERAL INSURANCE COMPANY |
|
$ |
1,550,000.00 |
|
Aug. 10, 2007 |
|
July 14, 2012 |
|
CTCS-706315 |
|
THE TRAVELERS INDEMNITY COMPANY |
|
$ |
168,000.00 |
|
Dec. 05, 2008 |
|
Nov. 24, 2012 |
|
CTCS-945668 |
|
CHUBB & SON, A DIVISION OF FEDERAL |
|
$ |
510,000.00 |
|
Aug. 12, 2011 |
|
July 15, 2012 |
|
Schedule 5.01
Organization Information
Legal Name |
|
Type of Entity |
|
Organization |
|
Federal |
|
Jurisdiction of |
|
TCS Holdings, Inc. |
|
Corporation |
|
4381164 |
|
26-0565401 |
|
Delaware |
|
The Container Store, Inc. |
|
Corporation |
|
43435300 |
|
75-1596981 |
|
Texas |
|
TCS Gift Card Services, LLC |
|
Limited Liability Company |
|
N/A |
|
20-1367975 |
|
Virginia |
|
TCS Installation Services, LLC |
|
Limited Liability Company |
|
801520607 |
|
45-4000316 |
|
Texas |
|
Schedule 5.08(c)
Owned Real Estate(1)
Record Owner |
|
Address |
|
Book Value (USD) |
|
Estimated Fair |
| ||
|
|
|
|
|
|
|
| ||
Elfa Sweden AB |
|
Elfagatan 5 |
|
$ |
6,719,512 |
|
$ |
6,097,561 |
|
|
|
|
|
|
|
|
| ||
Luminator AB |
|
Garverigatan 10 |
|
$ |
300,571 |
|
$ |
2,149,390 |
|
|
|
|
|
|
|
|
| ||
Elfa Polska Sp. Z o.o |
|
Ul. Lukasiewicza 2 |
|
$ |
263,259 |
|
$ |
263,259 |
|
|
|
|
|
|
|
|
| ||
Elfa Manufacturing Poland Sp. Z o.o(2) |
|
Strefowa 7 |
|
$ |
3,637,348 |
|
$ |
4,436,585 |
|
|
|
|
|
|
|
|
| ||
OY Elfa Finland AB(3) |
|
Kylänportti 8 |
|
$ |
484,039 |
|
$ |
1,103,750 |
|
|
|
|
|
|
|
|
| ||
Kirena OY |
|
Heloittajankatu 4 |
|
$ |
1,599,116 |
|
$ |
3,768,902 |
|
|
|
|
|
|
|
|
| ||
Pekodom GMBH(3) |
|
Seidenweberstr. 80-82 D |
|
$ |
632,376 |
|
$ |
551,875 |
|
|
|
|
|
|
|
|
| ||
Elfa Norge A/S |
|
Nygårdsveien 76 |
|
$ |
1,376,088 |
|
$ |
7,015,244 |
|
(1) All valuations are based on the Borrowers most recent appraisals which were completed within the last 12 months except as identified herein.
(2) Valuation based on the Borrowers most recent appraisal completed in November 2010.
(3) Valuation based on the Borrowers most recent appraisal completed in December 2009.
Schedule 5.08(d)(i)
Leased Real Estate (Lessee)
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
Corporate HQ and Distribution Center |
|
The Container Store, Inc. |
|
Freeport X 500 Freeport Parkway
Coppell, TX 75019 |
|
Dallas |
|
Duke Secured Financing 2009 - 1ALZ, LLC |
|
4/30/2019 |
|
|
|
|
|
|
|
|
|
|
|
5 (AUS) |
|
The Container Store, Inc. |
|
Shopping Center at Gateway 9629 Research Blvd. Austin, TX 78759 |
|
Travis |
|
Shopping Center at Gateway, LP |
|
7/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
6 (SAN) |
|
The Container Store, Inc. |
|
San Pedro Crossing 333 Northwest Loop 410 San Antonio, TX 78216 |
|
Bexar |
|
BB-Lincoln US Properties, L.P. |
|
1/31/2013 |
|
|
|
|
|
|
|
|
|
|
|
7 (HOU) |
|
The Container Store, Inc. |
|
Post Oak Center 2511 Post Oak Blvd Houston, TX 77056 |
|
Harris |
|
WMKJ Ltd. |
|
7/31/2021 |
|
|
|
|
|
|
|
|
|
|
|
8 (FTW) |
|
The Container Store, Inc. |
|
Ft. Worth 4620 South Hulen Street Fort Worth, TX 76132 |
|
Tarrant |
|
Agathon, Inc. |
|
8/31/2013 (will expire at the same time as the FW Chapel Hill opening (Planned: July 2012)) |
|
|
|
|
|
|
|
|
|
|
|
10 (BUC) |
|
The Container Store, Inc. |
|
Buckhead Square 3255 Peachtree Rd., NE Atlanta, GA 30305 |
|
Fulton |
|
Selig Enterprises, Inc. |
|
9/14/12 (will terminate when 065 (BKH) opens Current planned |
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
opening 9/15/12)) |
|
|
|
|
|
|
|
|
|
|
|
11 (TYC) |
|
The Container Store, Inc. |
|
Tysons Corner 8508 Leesburg Pike Vienna, VA 22182 |
|
Fairfax |
|
CG Tysons Corner LLC |
|
6/30/2017 |
|
|
|
|
|
|
|
|
|
|
|
12 (OAB) |
|
The Container Store, Inc. |
|
Oak Brook Village Court 1500-16th St Oak Brook, IL 60523 |
|
Du Page |
|
Core Fund Oak Brook Property, LLC |
|
6/30/2014 |
|
|
|
|
|
|
|
|
|
|
|
13 (ROC) |
|
The Container Store, Inc. |
|
Congressional Plaza 1501 Rockville Pike Rockville, IL 20852 |
|
Kankakee |
|
Federal Realty - Congressional Plaza Assoc |
|
11/30/2019 |
|
|
|
|
|
|
|
|
|
|
|
14 (SCH) |
|
The Container Store, Inc. |
|
Woodfield Village Green 1460 East Golf Rd. Schaumburg, IL 60173 |
|
Cook |
|
DDR MDT Woodfield Village, LLC |
|
2/28/2014 |
|
|
|
|
|
|
|
|
|
|
|
15 (NOR) |
|
The Container Store, Inc. |
|
Village Square Northbrook 101 Skokie Blvd. Northbrook, IL 60062 |
|
Cook |
|
Village Square of Northbrook |
|
2/29/2016 |
|
|
|
|
|
|
|
|
|
|
|
17 (SOC) |
|
The Container Store, Inc. |
|
South Coast Plaza 901-G South Coast Drive Costa Mesa, CA 92626 |
|
Orange |
|
Metro Pointe Retail Associates II, LP |
|
5/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
18 (PKM) |
|
The Container Store, Inc. |
|
South Denver Marketplace 8687 Park Meadows Center Dr. Lone Tree, CO 80124 |
|
Douglas |
|
South Denver Marketplace, Inc. |
|
1/31/2013 |
|
|
|
|
|
|
|
|
|
|
|
19 (PER) |
|
The Container Store, Inc. |
|
Perimeter Crossing 120 Perimeter Center West, NE Suite 100 |
|
Fulton |
|
Daltex Perimeter, Inc. |
|
2/28/2018 |
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlanta, GA 30346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 (CHI) |
|
The Container Store, Inc. |
|
North & Clybourn 908 West North Ave. Chicago, IL 60622 |
|
Cook |
|
North & Clyburn, LLC |
|
1/31/2013 |
|
|
|
|
|
|
|
|
|
|
|
21 (SDG) |
|
The Container Store, Inc. |
|
Fashion Valley Mall 7097 Friars Rd. San Diego, CA 92108 |
|
San Diego |
|
Fashion Valley Mall, LLC |
|
5/31/2013 |
|
|
|
|
|
|
|
|
|
|
|
22 (NPK) |
|
The Container Store, Inc. |
|
Lincoln Square 7700 W. Northwest Hwy., Ste 500 Dallas, TX 75225 |
|
Dallas |
|
MS Inland Fund, LLC |
|
2/28/2014 |
|
|
|
|
|
|
|
|
|
|
|
23 (GAL) |
|
The Container Store, Inc. |
|
Galleria North 5203 Alpha Rd. Dallas, TX 75240 |
|
Dallas |
|
HART Galleria North, LLC |
|
7/31/2017 |
|
|
|
|
|
|
|
|
|
|
|
24 (MIA) |
|
The Container Store, Inc. |
|
Shops at Dadeland 7200 North Kendall Drive Miami, FL 33156 |
|
Miami-Dade |
|
Sunshine Land Associates Limited Partnership |
|
11/30/2014 |
|
|
|
|
|
|
|
|
|
|
|
25 (CHP) |
|
The Container Store, Inc. |
|
Champions Forest Plaza 5466 FM 1960 West Houston, TX 77069 |
|
Harris |
|
Jim R. Smith & Co |
|
2/28/2014 |
|
|
|
|
|
|
|
|
|
|
|
26 (WHP) |
|
The Container Store, Inc. |
|
White Plains 145 Westchester Avenue White Plains, NY 10601 |
|
Westchester |
|
XTP Ventures, LLC |
|
1/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
27 (SLK) |
|
The Container Store, Inc. |
|
Southlake Town Square 1200 Main Street Southlake, TX 76092 |
|
Tarrant |
|
Inland Southwest Management LLC |
|
2/28/2017 |
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
28 (COL) |
|
The Container Store, Inc. |
|
Easton Town Center 4222 Easton Loop West Columbus, OH 43219 |
|
Franklin |
|
Easton Town Center II, LLC |
|
2/28/2017 |
|
|
|
|
|
|
|
|
|
|
|
29 (WAC) |
|
The Container Store, Inc. |
|
Plaza Escuela 1100 Locust Street Walnut Creek, CA 94596 |
|
Contra Costa |
|
Escuela Shopping Center, LLC |
|
2/28/2017 |
|
|
|
|
|
|
|
|
|
|
|
30 (AVA) |
|
The Container Store, Inc. |
|
Market Common Clarendon 2800 Clarendon Blvd., R-750 Arlington, VA 22201 |
|
Arlington |
|
TIAA-Market Commons |
|
2/28/2013 |
|
|
|
|
|
|
|
|
|
|
|
31 (COM) |
|
The Container Store, Inc. |
|
Town Center Corte Madera 210 Corte Madera Town Center Corte Madera, CA 94925 |
|
Marin |
|
770 Tamalpais Drive, Inc. |
|
6/30/2017 |
|
|
|
|
|
|
|
|
|
|
|
32 (PAR) |
|
The Container Store, Inc. |
|
Paramus 370 Route 17 North Paramus, NJ 07652 |
|
Bergen |
|
Coolidge Paramus, LLC |
|
2/28/2021 |
|
|
|
|
|
|
|
|
|
|
|
33 (SFO) |
|
The Container Store, Inc. |
|
Pacific Place Retail and Storage 26 Fourth St San Francisco, CA 94103 |
|
San Francisco |
|
Jamestown Premier Pacific Place, LP |
|
2/28/2018 |
|
|
|
|
|
|
|
|
|
|
|
34 (SJO) |
|
The Container Store, Inc. |
|
Santana Row 3080 Stevens Creek Blvd., Ste 1000 San Jose, CA 95128 |
|
Santa Clara |
|
FRIT San Jose Town and Country Village, LLC |
|
10/31/2013 |
|
|
|
|
|
|
|
|
|
|
|
35 (6AV) |
|
The Container Store, Inc. |
|
Manhattan Retail Manhattan - Storage 629 Sixth Avenue |
|
New York |
|
625 Ownership, LLC |
|
2/28/2019 |
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY 10011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 (WDC) |
|
The Container Store, Inc. |
|
CityLine at Tenley 4500 Wisconsin Avenue Washington, DC 20016 |
|
District of Columbia |
|
Cityline at Tenley, Inc. |
|
2/28/2019 |
|
|
|
|
|
|
|
|
|
|
|
37 (PAS) |
|
The Container Store, Inc. |
|
Fair Oaks & Union One East Union Street Pasadena CA 91103 |
|
Los Angeles |
|
Fair Oaks & Union, LLC |
|
8/13/2021 |
|
|
|
|
|
|
|
|
|
|
|
38 (CHH) |
|
The Container Store, Inc. |
|
Chestnut Hill Shopping Center 27 Boylston Street Chestnut Hill, MA 02467 |
|
Middlesex |
|
27 Boylston Street LLC |
|
2/29/2020 |
|
|
|
|
|
|
|
|
|
|
|
39 (NAT) |
|
The Container Store, Inc. |
|
Natick 1265 Worcester St. Natick, MA 01760 |
|
Middlesex |
|
D&S Market Properties Limited Partnership |
|
1/31/2016 |
|
|
|
|
|
|
|
|
|
|
|
40 (POR) |
|
The Container Store, Inc. |
|
Bridgeport Village 7417 SW Bridgeport Rd. Tigard, OR 97224 |
|
Washington |
|
BV CenterCal, LLC |
|
2/29/2016 |
|
|
|
|
|
|
|
|
|
|
|
41 (BEL) |
|
The Container Store, Inc. |
|
Lincoln Square Retail and Storage 700 Bellevue Way NE Bellevue, WA 98004 |
|
King |
|
Lincoln Square Retail, LLC |
|
3/31/2021 |
|
|
|
|
|
|
|
|
|
|
|
042 & 042B (LEX) |
|
The Container Store, Inc. |
|
Lexington Retail and Storage 725 Lexington Avenue New York, NY 10022 |
|
New York |
|
731 Retail One, LLC (042)
731 Office One (042B) |
|
2/28/2021 |
|
|
|
|
|
|
|
|
|
|
|
43 (CEN) |
|
The Container Store, Inc. |
|
Century City Mall 10250 Santa Monica Blvd. #218 |
|
Los Angeles |
|
Century City Mall, LLC |
|
1/31/2022 |
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Los Angeles, CA 90067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44 (STL) |
|
The Container Store, Inc. |
|
Brentwood Square 1769 Brentwood Blvd. St. Louis. MO 63144 |
|
St. Louis |
|
Pace-Brentwood Partners, LLC |
|
2/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
45 (CCR) |
|
The Container Store, Inc. |
|
Cherry Creek Mall 2500 E. First Avenue, Suite B-111 Denver, CO 80206 |
|
Denver |
|
Taubman-Cherry Creek Limited Partnership |
|
2/28/2018 |
|
|
|
|
|
|
|
|
|
|
|
46 (CHL) |
|
The Container Store, Inc. |
|
Cherry Hill Mall 2000 Route 38, OP-2 Cherry Hill, NJ 08002 |
|
Camden |
|
Cherry Hill Center, LLC |
|
2/28/2018 |
|
|
|
|
|
|
|
|
|
|
|
47 (LTR) |
|
The Container Store, Inc. |
|
Midtowne Little Rock 209 N. University Little Rock, AR 72205 |
|
Pulaski |
|
IMI MTLR II, LLC |
|
2/28/2019 |
|
|
|
|
|
|
|
|
|
|
|
48 (SCT) |
|
The Container Store, Inc. |
|
Shops at Chauncey Ranch 18550 N. Scottsdale Rd. Phoenix, AZ 85054 |
|
Maricopa |
|
Levine Investments II, LLP |
|
2/28/2019 |
|
|
|
|
|
|
|
|
|
|
|
49 (STN) |
|
The Container Store, Inc. |
|
Village at Stonebriar 8460 Parkwood Blvd Plano, TX 75086 |
|
Collin |
|
USL Frisco, LLC |
|
2/29/2024 |
|
|
|
|
|
|
|
|
|
|
|
50 FVW) |
|
The Container Store, Inc. |
|
Village at Fairview 151 E. Stacy Rd. Fairview, TX 75069 |
|
Collin |
|
The Village at Fairview, LP |
|
2/28/2021 |
|
|
|
|
|
|
|
|
|
|
|
51 (MIN) |
|
The Container Store, Inc. |
|
Centennial Shops 3825 Gallagher Dr Edina MN 55435 |
|
Hennepin |
|
Carlyle/Cypress Edina, LLC |
|
2/28/2019 |
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
52 (CIN) |
|
The Container Store, Inc. |
|
Kenwood Towne Place 5901 E. Galbraith Rd Cincinnati, OH 45236-2251 |
|
Hamilton |
|
Kenwood Towne Place, LLC Frank Hartge, As Court Appointed Receiver |
|
2/28/2019 |
|
|
|
|
|
|
|
|
|
|
|
53 (FLT) |
|
The Container Store, Inc. |
|
FlatIron Crossing 51 W. FlatIron Crossing Dr., #ANC02 Broomfield, CO 80021 |
|
Broomfield |
|
FlatIron Property Holding, LLC |
|
2/29/2020 |
|
|
|
|
|
|
|
|
|
|
|
54 (HAL) |
|
The Container Store, Inc. |
|
The Village at Gulfstream Park 500 Seabiscuit Trail, Suite 1000 Hallandale Beach, FL 33009-2573 |
|
Broward |
|
The Village at Gulfstream Park, LLC |
|
2/28/2020 |
|
|
|
|
|
|
|
|
|
|
|
55 (RAL) |
|
The Container Store, Inc. |
|
Glenwood Place 4601 Creedmoor Rd Raleigh, NC 27612 |
|
Wake |
|
SDC Glenwood Place, LLC |
|
2/28/2026 |
|
|
|
|
|
|
|
|
|
|
|
56 (IND) |
|
The Container Store, Inc. |
|
Shops at Rivers Edge 4120 E. 82nd St Indianapolis, IN 46250 |
|
Marion |
|
KRG RIVERS EDGE, LLC |
|
2/28/2022 |
|
|
|
|
|
|
|
|
|
|
|
57 (CHR) |
|
The Container Store, Inc. |
|
SouthPark Mall 4345 Barclay Downs Dr, Charlotte, NC 28209 |
|
Mecklenburg |
|
SOUTHPARK MALL LIMITED PARTNERSHIP |
|
2/28/2022 |
|
|
|
|
|
|
|
|
|
|
|
58 (NSH) |
|
The Container Store, Inc. |
|
The Mall at Green Hills
2121 Green Hills Village Dr, Nashville TN 37215-2601 |
|
Davidson |
|
Green Hills Mall TRG, LLC
(Taubman) |
|
2/28/2022 |
|
|
|
|
|
|
|
|
|
|
|
59 (WDL) |
|
The Container Store, Inc. |
|
Lake Woodlands South
1455 Lake Woodlands Dr |
|
Montgomery |
|
AmREIT, Inc. |
|
2/28/2022 |
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Woodlands, TX 77380-3284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60 (ATX) |
|
The Container Store, Inc. |
|
Arlington Highlands
4000 Arlington Highlands Blvd, #101 Arlington, TX 76018-1153 |
|
Tarrant |
|
Arlington Highlands, Ltd |
|
3/31/2022 |
|
|
|
|
|
|
|
|
|
|
|
61 (SEG) |
|
The Container Store, Inc. |
|
Plaza El Segundo
710 Sepulveda Blvd El Segundo, CA 90245-4717 |
|
Los Angeles |
|
PES Partners, LLC |
|
6/30/2022 |
|
|
|
|
|
|
|
|
|
|
|
62 (LVG) |
|
The Container Store, Inc. |
|
Town Square Las Vegas
6521 Las Vegas Blvd South, C-103 Las Vegas, NV 89119 |
|
Clark |
|
TSLV, LLC |
|
2/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
64 (NSM) |
|
The Container Store, Inc. |
|
NorthShore Mall
210 Andover St., #LL01 Peabody, MA 01960 |
|
Essex |
|
Mall at Northshore, LLC |
|
2/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
65 (BKH) |
|
The Container Store, Inc. |
|
Buckhead Triangle
3637 Peachtree Rd NE, Suite C Atlanta, GA 30319-1253 |
|
Fulton |
|
Buchhead Triangle, L.P. |
|
2/28/2023 |
|
|
|
|
|
|
|
|
|
|
|
66 (WES) |
|
The Container Store, Inc. |
|
The Galleria at Westbury Plaza 900 Old Country Rd, Westbury, NY 11590 |
|
Nassau |
|
EQUITY ONE (NORTHEAST PORTFOLIO), INC. |
|
2/28/2027 |
|
|
|
|
|
|
|
|
|
|
|
Not Yet Assigned |
|
The Container Store, Inc. |
|
Chapel Hill Shopping Center |
|
Tarrant |
|
SPC Chapel Hill, Ltd. |
|
2/28/2023 |
Store # |
|
Lessee |
|
Location Name / Address |
|
County |
|
Lessor |
|
Current Expiration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4601 West Freeway, Suite 500
Ft. Worth, TX 76107 |
|
|
|
|
|
(Based on tentative opening July 2013) |
|
|
|
|
|
|
|
|
|
|
|
Not Yet Assigned |
|
The Container Store, Inc. |
|
The Corner Shopping Center
4720 W. Spruce St, Unit #3
Tampa, FL 33609 |
|
Hillsborough |
|
Saber Corner, LLC |
|
6/30/2028
(Based on tentative opening March 2013) |
Schedule 5.08(d)(ii)
Leased Real Estate (Lessor)
None.
Schedule 5.08(e)
Existing Investments
Promissory Note, dated April 6, 2012, in the original principal amount of $2,267,941.68 made by Elfa International AB (successor in interest to Elfa Group AB) for the benefit of The Container Store, Inc. This note is set to mature on June 30, 2012 and as of February 25, 2012 the remaining principal balance is $409,489.44.
Promissory Note, dated April 6, 2012, in the original principal amount of $712,500 made by Elfa International AB (successor in interest to Elfa Group AB) for the benefit of The Container Store, Inc. This note is set to mature on June 30, 2012 and as of February 25, 2012 the remaining balance is $128,645.81.
Schedule 5.10
Insurance
Coverage |
|
Policy |
|
Insurer |
|
Policy |
|
Summary of Coverage | |||
|
|
|
|
|
|
|
|
|
|
| |
Property |
|
GQ336 |
|
Affiliated FM Insurance Company |
|
7/15/2011 - 7/15/2012 |
|
$ |
175,000,000 |
|
Combined Building, Personal Property, Business Income and Boiler & Machinery Limit for any one loss |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
See Policy Schedule for location specific coverage and deductibles as deductibles vary by coverage. | |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Extension of coverage includes: Earthquake, Flood, Motor Truck Cargo | |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Flood Excluded at: | |
|
|
|
|
|
|
|
|
|
|
901 S. Coast Dr., Costa Mesa, CA | |
|
|
|
|
|
|
|
|
|
|
219 Corte Madera, Town Center, Corte Madera, CA | |
|
|
|
|
|
|
|
|
|
|
18550 North Scottsdale Road, Phoenix, AZ 85054 | |
|
|
|
|
|
|
|
|
|
|
500 Seabiscuit Trail, Suite 1000, Hallandale Beach, FL | |
|
|
|
|
|
|
|
|
|
|
| |
Flood |
|
6002832555 |
|
Travelers |
|
3/3/2011-3/3/2012 |
|
$ |
500,000 |
|
Business Personal Property |
|
$ |
1,000 |
|
Deductible | |||||||
|
|
|
Location: 901 S. Coast Dr, Costa Mesa, CA 92626 | ||||||||
|
|
|
|
|
|
|
|
|
|
| |
Flood |
|
87016530842009 |
|
Hartford |
|
12/06/2010-12/06/2011 |
|
$ |
500,000 |
|
Business Personal Property |
|
$ |
1,000 |
|
Deductible | |||||||
|
|
|
Location: 219 Corte Madera Town Ctr, | ||||||||
|
|
|
Corte Madera , CA 94925 | ||||||||
|
|
|
|
|
|
|
|
|
|
| |
Flood |
|
FLD1309575 |
|
Selective |
|
4/24/2011-4/24/2012 |
|
$ |
500,000 |
|
Business Personal Property |
|
$ |
1,000 |
|
Deductible | |||||||
|
|
|
Location: 500 Seabiscuit Trl, #1000, | ||||||||
|
|
|
Hallandale Beach, FL 33009 |
Coverage |
|
Policy |
|
Insurer |
|
Policy |
|
Summary of Coverage | |||
|
|
|
|
|
|
|
|
|
|
| |
Flood |
|
FLD1327425 |
|
Selective |
|
10/28/2010-10/28/2011 |
|
$ |
500,000 |
|
Business Personal Property |
|
$ |
1,000 |
|
Deductible | |||||||
|
|
|
Location: 18550 N. Scottsdale Rd | ||||||||
|
|
|
Phoenix, AZ 85054 | ||||||||
|
|
|
|
|
|
|
|
|
|
| |
General Liability |
|
35769084 |
|
Federal Insurance Company |
|
7/15/2011 - 7/15/2012 |
|
$ |
10,000,000 |
|
General Aggregate |
|
$ |
2,000,000 |
|
Products/Completed Operations | |||||||
|
$ |
1,000,000 |
|
Personal/Advertising Injury | |||||||
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Each Occurrence Limit |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Damage to Premises Rented to You |
|
|
|
|
|
|
|
|
$ |
2,500 |
|
Medical Expense Any One Person |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Employee Benefits Liability | |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Each Claim |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Aggregate |
|
|
|
|
|
|
|
|
$ |
25,000 |
|
Deductible Each Claim |
|
|
|
|
|
|
|
|
07/15/2007 |
|
Retroactive Date | |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Additional Insured where required by contract. Waiver of Subrogation where required by contract. | |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Estimated Sales: $549,475,921 | |
|
|
|
|
|
|
|
|
|
|
| |
Business Auto |
|
73506985 |
|
Federal Insurance Company |
|
7/15/2011 - 7/15/2012 |
|
$ |
1,000,000 |
|
Combined Single Limit |
|
$ |
2,500 |
|
Personal Injury Protection | |||||||
|
$ |
1,000,000 |
|
Uninsured / Underinsured Motorist | |||||||
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Actual Cash Value Minus $1,000 Collision | |
|
|
|
|
|
|
|
|
|
|
Deductible | |
|
|
|
|
|
|
|
|
|
|
Actual Cash Value Minus $1,000 Comprehensive | |
|
|
|
|
|
|
|
|
|
|
Deductible |
Coverage |
|
Policy |
|
Insurer |
|
Policy |
|
Summary of Coverage | |||
|
|
|
|
|
|
|
|
|
|
| |
Workers Compensation |
|
71703825 |
|
Federal Insurance Company |
|
7/15/2011 - 7/15/2012 |
|
Statutory |
|
Workers Compensation | |
|
Limits |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
Employers Liability Each Accident | |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Employers Liability Each Employee |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Employers Liability Policy Limit |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
2011 Exp Modifier (excl CA & NJ): 1.00 | |
|
|
|
|
|
|
|
|
|
|
2011 Exp Modifier (NJ): TBD | |
|
|
|
|
|
|
|
|
|
|
2011 Exp Modifier (CA): 1.51 | |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Estimated Annual Payroll: $88,333,203 | |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Final Premium Subject To Audit |
Coverage |
|
Policy |
|
Insurer |
|
Policy |
|
Summary of Coverage | ||||
|
|
|
|
|
|
|
|
|
|
| ||
Foreign Package |
|
73248777 |
|
Great Northern Insurance Company |
|
7/15/2011 - 7/15/2012 |
|
$ |
1,000,000 |
|
General Aggregate | |
$ |
1,000,000 |
|
Products/Completed Operations | |||||||||
$ |
1,000,000 |
|
Personal/Advertising Injury | |||||||||
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Each Occurrence Limit | |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Damage to Premises Rented to You | |
|
|
|
|
|
|
|
|
$ |
10,000 |
|
Medical Expense Any One Person | |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
Employee Benefit Programs Acts, Errors Or | ||
|
|
|
|
|
|
|
|
$ |
250,000 |
|
Omissions Aggregate Limit | |
|
|
|
|
|
|
|
|
07/15/2003 |
|
Retroactive Date | ||
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Automobile Combined Single Limit | |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Employers Liability Each Accident | |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Employers Liability Each Employee | |
|
|
|
|
|
|
|
|
$ |
1,000,000 |
|
Employers Liability Policy Limit | |
|
|
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
$ |
100,000 |
|
Kidnap & Ransom Limit | |
|
|
|
|
|
|
|
|
$ |
500 |
|
Deductible | |
|
|
|
|
|
|
|
|
|
|
| ||
Primary Umbrella Liability |
|
4017549530 |
|
Continental Casualty Co. |
|
7/15/2011 - 7/15/2012 |
|
$ |
25,000,000 |
|
Limit Per Occurrence | |
|
$ |
25,000,000 |
|
Aggregate | ||||||||
|
|
|
|
|
|
|
|
|
|
| ||
Excess Umbrella Liability |
|
79878009 |
|
Firemans Fund Insurance Co. |
|
7/15/2011 - 7/15/2012 |
|
$ |
25,000,000 |
|
Limit Per Occurrence | |
|
$ |
25,000,000 |
|
Aggregate | ||||||||
|
|
|
|
|
|
|
|
|
|
These Limits are Excess of Primary Limits of $25,000,000. | ||
Coverage |
|
Policy |
|
Insurer |
|
Policy |
|
Summary of Coverage | ||||||
|
|
|
|
|
|
|
|
|
|
| ||||
Crime |
|
8179-9586 |
|
Federal Insurance Co |
|
7/15/2011-7/15/2012 |
|
$ |
3,000,000 |
|
Employee Theft | |||
|
$ |
3,000,000 |
|
Premises | ||||||||||
|
|
|
|
|
|
|
|
$ |
3,000,000 |
|
Transit | |||
|
|
|
|
|
|
|
|
$ |
3,000,000 |
|
Forgery | |||
|
|
|
|
|
|
|
|
$ |
3,000,000 |
|
Computer Fraud | |||
|
|
|
|
|
|
|
|
$ |
3,000,000 |
|
Funds Transfer Fraud | |||
|
|
|
|
|
|
|
|
$ |
3,000,000 |
|
Money Orders and Counterfeit | |||
|
|
|
|
|
|
|
|
$ |
100,000 |
|
Credit Card Fraud | |||
|
|
|
|
|
|
|
|
$ |
3,000,000 |
|
Client Coverage | |||
|
|
|
|
|
|
|
|
$ |
25,000 |
|
Expense Coverage | |||
|
|
|
|
|
|
|
|
$ |
25,000 |
|
Retention | |||
|
|
|
|
|
|
|
|
|
|
| ||||
D&O, Fiduciary and Employment Practices - Primary |
|
14MGU12A2 |
|
HCC Global |
|
3/1/12-3/1/13 |
|
$ |
15,000,000 |
|
Limit of Liability | |||
|
$ |
100,000 |
|
Retention | ||||||||||
|
|
|
| |||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||
D&O, Fiduciary and Employment Practices - Excess |
|
DOX0034954 |
|
Arch |
|
3/1/12-3/1/13 |
|
$ |
10,000,000 |
|
Limit of Liability in excess of $15,000,000 | |||
|
|
|
| |||||||||||
|
|
|
| |||||||||||
Schedule 5.13
Subsidiaries and Other Equity Investments
Part (a) Equity Interests in Subsidiaries
|
|
|
|
Percentage of |
|
|
|
|
|
|
Equity Interests |
|
|
Entity |
|
Holder |
|
Owned |
|
Jurisdiction |
The Container Store, Inc. |
|
TCS Holdings, Inc. |
|
100% |
|
Texas |
TCS Gift Card Services, LLC |
|
The Container Store, Inc. |
|
100% |
|
Virginia |
TCS Installation Services, LLC |
|
The Container Store, Inc. |
|
100% |
|
Texas |
Elfa International AB |
|
The Container Store, Inc. |
|
100% |
|
Sweden |
Elfa Deutschland GmbH |
|
Elfa International AB |
|
100% |
|
Germany |
Kirena OY |
|
Elfa International AB |
|
100% |
|
Finland |
Elfa Sweden AB |
|
Elfa International AB |
|
100% |
|
Sweden |
Luminator AB |
|
Elfa International AB |
|
100% |
|
Sweden |
Pekodom GmbH |
|
Elfa International AB |
|
100% |
|
Germany |
Elfa France SA |
|
Elfa Sweden AB |
|
100% |
|
France |
Elfa Lumi AB |
|
Elfa Sweden AB |
|
100% |
|
Sweden |
Elfa Manufacturing Poland Sp. Z o.o |
|
Elfa Sweden AB |
|
100% |
|
Poland |
Elfa Lumi A/S |
|
Elfa Sweden AB |
|
100% |
|
Denmark |
OY Elfa Finland AB |
|
Elfa Sweden AB |
|
100% |
|
Finland |
Elfa Polska Sp. Z o.o |
|
Elfa Sweden AB |
|
100% |
|
Poland |
Elfa Norge A/S |
|
Elfa Sweden AB |
|
100% |
|
Norway |
Lumi Norge A/S |
|
Luminator AB |
|
100% |
|
Norway |
Part (b) Other Equity Investments
None.
Schedule 5.17
Intellectual Property Rights
United States Patents
|
|
|
|
Application |
|
Application |
|
Patent |
|
|
Patent |
|
Owner |
|
No. |
|
Date |
|
No. |
|
Issue Date |
SUSPENSION DEVICE |
|
The Container Store, Inc. |
|
10/868038 |
|
6/16/04 |
|
7178769 |
|
2/20/07 |
COMPUTER SUPPORTED RETAIL SHOPPING SYSTEMS AND METHODS |
|
The Container Store |
|
11/450746 |
|
6/9/06 |
|
7681790 |
|
3/23/10 |
TOOL HOLDER |
|
Elfa International AB |
|
12/735717 |
|
11/1/10 |
|
|
|
|
SUSPENSION DEVICE |
|
Elfa International AB |
|
10/381722 |
|
6/2/03 |
|
6860456 |
|
3/1/05 |
FASTENING DEVICE |
|
Elfa International AB |
|
10/866162 |
|
6/14/04 |
|
7121417 |
|
10/17/06 |
SUSPENSION SYSTEM |
|
Elfa International AB |
|
10/909394 |
|
8/3/04 |
|
7243887 |
|
7/17/07 |
SELF-SUPPORTING SUSPENSION DEVICE AND METHOD FOR ASSEMBLING THEREOF |
|
Elfa International AB |
|
11/707888 |
|
2/20/07 |
|
7832573 |
|
11/16/10 |
WALL MOUNTED SHELF UNIT WITH TURNABLE POSTS FITTED WITH ARTICULATED JOINTS |
|
Elfa International AB |
|
29/081782 |
|
1/9/98 |
|
D406476 |
|
3/9/99 |
SHELF SUPPORT |
|
Elfa International AB |
|
29/081781 |
|
1/9/98 |
|
D407011 |
|
3/23/99 |
HOOK FOR A STRING SHELF |
|
Elfa International AB |
|
29/138702 |
|
3/20/01 |
|
D455065 |
|
4/2/02 |
MOUNTING GIRDER FOR A STRING SHELF SYSTEM |
|
Elfa International AB |
|
29/138703 |
|
3/20/01 |
|
D461657 |
|
8/20/02 |
HOOK |
|
Elfa International AB |
|
29/158855 |
|
4/12/02 |
|
D492891 |
|
7/13/04 |
WIRE DRAWER |
|
Elfa International AB |
|
29/158854 |
|
4/12/02 |
|
D493308 |
|
7/27/04 |
FOOT FOR A STAND |
|
Elfa International AB |
|
29/268914 |
|
11/16/06 |
|
D557526 |
|
12/18/07 |
CLOSET ROD HOLDER |
|
Elfa International AB |
|
29/259420 |
|
5/9/06 |
|
D572125 |
|
7/1/08 |
United States Trademarks
Mark |
|
Owner |
|
Application |
|
Filing |
|
Reg. No. |
|
Reg. Date |
HAPPY ORGANIZED HOME |
|
The Container Store, Inc. |
|
85/203344 |
|
12/21/10 |
|
N/A |
|
N/A |
VOW TO GET ORGANIZED |
|
The Container Store, Inc. |
|
85/442452 |
|
10/7/11 |
|
N/A |
|
N/A |
|
|
The Container Store, Inc. |
|
85/442515 |
|
10/7/11 |
|
N/A |
|
N/A |
THE CONTAINER STORE |
|
The Container Store, Inc. |
|
73/209963 |
|
4/2/79 |
|
1164143 |
|
8/4/81 |
CONTAIN YOURSELF! |
|
The Container Store, Inc. |
|
73/318980 |
|
7/14/81 |
|
1257975 |
|
11/15/83 |
CONTAIN IT |
|
The Container Store, Inc. |
|
73/537838 |
|
5/14/85 |
|
1373123 |
|
11/26/85 |
BIN IT BOX IT RACK IT BAG IT STACK IT TIN IT BOTTLE IT SHELF IT CAN IT SACK IT TRASH IT HANG IT HOOK IT STORE IT |
|
The Container Store, Inc. |
|
74/120437 |
|
12/4/90 |
|
1699573 |
|
7/7/92 |
THE CONTAINER STORE |
|
The Container Store, Inc. |
|
74/196476 |
|
8/20/91 |
|
1713572 |
|
9/8/92 |
|
|
The Container Store, Inc. |
|
74/511018 |
|
4/11/94 |
|
1911969 |
|
8/15/95 |
BLUE WATERS |
|
The Container Store, Inc. |
|
74/536651 |
|
6/13/94 |
|
1930313 |
|
10/24/95 |
EVENING GARDEN |
|
The Container Store, Inc. |
|
74/536655 |
|
6/13/94 |
|
1930314 |
|
10/24/95 |
THE CONTAINER STORE |
|
The Container Store, Inc. |
|
74/604750 |
|
11/30/94 |
|
1940914 |
|
12/12/95 |
MEADOW FLOWERS |
|
The Container Store, Inc. |
|
74/536654 |
|
6/13/94 |
|
2029125 |
|
1/7/97 |
HERBAL CUCUMBER |
|
The Container Store, Inc. |
|
75/082201 |
|
4/1/96 |
|
2077172 |
|
7/8/97 |
THE CONTAINER STORE |
|
The Container Store, Inc. |
|
75/476151 |
|
4/28/98 |
|
2470015 |
|
7/17/01 |
THE ORIGINAL STORAGE AND ORGANIZATION STORE |
|
The Container Store, Inc. |
|
75/736821 |
|
6/25/99 |
|
2486687 |
|
9/11/01 |
THE NEATEST SITE ON THE WEB |
|
The Container Store, Inc. |
|
76/245081 |
|
4/23/01 |
|
2517359 |
|
12/11/01 |
ORGANIZE BEFORE YOU ITEMIZE |
|
The Container Store, Inc. |
|
76/386047 |
|
3/22/02 |
|
2672077 |
|
1/7/03 |
GIFT WRAP WONDERLAND |
|
The Container Store, Inc. |
|
76/377716 |
|
3/4/02 |
|
2695250 |
|
3/11/03 |
WHO SAYS A TRASH CAN CANT MAKE YOU SMILE? |
|
The Container Store, Inc. |
|
76/481738 |
|
1/13/03 |
|
2790891 |
|
12/9/03 |
WHO SAYS A STORE CANT CHANGE YOUR LIFE? |
|
The Container Store, Inc. |
|
76/481739 |
|
1/13/03 |
|
2790892 |
|
12/9/03 |
LIFES LITTLE PLEASURES. ORGANIZED. |
|
The Container Store, Inc. |
|
78/624977 |
|
5/6/05 |
|
3231091 |
|
4/17/07 |
GOSHOP! |
|
The Container Store, Inc. |
|
78/639985 |
|
5/31/05 |
|
3259305 |
|
7/3/07 |
LIFES MORE FUN WHEN YOURE ORGANIZED |
|
The Container Store, Inc. |
|
78/640709 |
|
5/31/05 |
|
3320086 |
|
10/23/07 |
MAKE A DATE TO GET ORGANIZED |
|
The Container Store, Inc. |
|
77/274226 |
|
9/7/07 |
|
3502802 |
|
9/16/08 |
DORM ROOM BASIC SIX |
|
The Container Store, Inc. |
|
77/490689 |
|
6/4/08 |
|
3642234 |
|
6/23/09 |
GOSHOP! |
|
The Container Store, Inc |
|
77/657936 |
|
1/27/09 |
|
3663470 |
|
8/4/09 |
WHAT WE STAND FOR - ORGANIZATION WITH HEART |
|
The Container Store, Inc. |
|
77/938228 |
|
2/17/10 |
|
3850042 |
|
9/21/10 |
WHAT WE STAND FOR |
|
The Container Store, Inc. |
|
77/938240 |
|
2/17/10 |
|
3850043 |
|
9/21/10 |
DO A LITTLE DANCE - EVERY TIME YOU OPEN YOUR CLOSET DOOR |
|
The Container Store, Inc. |
|
77/875622 |
|
11/18/09 |
|
3932138 |
|
3/15/11 |
ELFA |
|
Elfa International AB |
|
73/149720 |
|
11/23/77 |
|
1131621 |
|
3/11/80 |
|
Elfa International AB |
|
74/088329 |
|
8/15/90 |
|
1797013 |
|
10/5/93 | |
ELFA DÉCOR |
|
Elfa International AB |
|
76/473685 |
|
12/10/02 |
|
2814662 |
|
2/17/04 |
ELFA EVERYWHERE |
|
Elfa International AB |
|
77/225230 |
|
7/9/07 |
|
3394552 |
|
3/11/08 |
ELFA EVERYWHERE |
|
Elfa International AB |
|
77/225279 |
|
7/9/07 |
|
3452480 |
|
6/24/08 |
|
Elfa International AB |
|
79/092815 |
|
9/7/10 |
|
4085814 |
|
1/17/12 | |
ELFA FREESTANDING |
|
Elfa International AB |
|
77/053725 |
|
11/30/06 |
|
3513122 |
|
10/7/08 |
Copyrights
Title |
|
Owner |
|
Registration No. |
|
Registration Date |
Annual 30% off Elfa sale : the Container store closet planning guide |
|
the Container Store, Inc. |
|
TX2800400 |
|
4/16/90 |
Annual 30% off Elfa sale: the Container Store closet planning guide |
|
the Container Store, Inc. |
|
TX2802414 |
|
4/11/90 |
The Container Store, organization university : guide for college-bound students |
|
the Container Store, Inc. |
|
TX2970414 |
|
9/11/90 |
Book box |
|
Container Store, Inc. |
|
TX3816401 |
|
10/20/94 |
Title |
|
Owner |
|
Registration No. |
|
Registration Date |
The Container Store clothing storage and protection guidelines |
|
Container Store, Inc. |
|
TX3834371 |
|
8/29/94 |
The Container Store for shipping and moving, storing and giving, we have it all |
|
Container Store, Inc. |
|
TX3834372 |
|
8/29/94 |
The Container Store steps to organize space |
|
Container Store, Inc. |
|
TX3834373 |
|
8/29/94 |
The Container Store holiday gift ideas |
|
Container Store, Inc. |
|
TX3834374 |
|
8/29/94 |
Christmas 1993 |
|
Container Store, Inc. |
|
TX3834375 |
|
8/29/94 |
The Container Store : the basic six |
|
Container Store, Inc. |
|
TX4003609 |
|
3/27/95 |
A parents guide to back to school |
|
Container Store, Inc. |
|
TX4003610 |
|
3/27/95 |
Elfa Easy Hang Shelving |
|
Container Store, Inc. |
|
TX4003611 |
|
3/27/95 |
Save 30-50% off our most popular items during our spring organization sale |
|
Container Store, Inc. |
|
TX4003612 |
|
3/27/95 |
The Container Store tax shelters $1.19 and up |
|
Container Store, Inc. |
|
TX4003613 |
|
3/27/95 |
The Container Store closet planning guide |
|
Container Store, Inc. |
|
TX4003614 |
|
3/27/95 |
Skandia shelving : the Container Store |
|
Container Store, Inc. |
|
TX4003615 |
|
3/27/95 |
Let it sale, let it sale, let it sale! : the Container Store |
|
Container Store, Inc. |
|
TX4003616 |
|
3/27/95 |
Organize your space : the Container Store |
|
Container Store, Inc. |
|
TX4003617 |
|
3/27/95 |
Gifts for the graduate |
|
Container Store, Inc. |
|
TX4008241 |
|
3/30/95 |
elfa easy hang shelving (price sheet) |
|
Container Store, Inc. |
|
TX4279310 |
|
5/3/96 |
The Container Store guide for beautiful bows |
|
Container Store, Inc. |
|
TX4279311 |
|
5/3/96 |
Grids and accessories |
|
Container Store, Inc. |
|
TX4279312 |
|
5/3/96 |
Camptime : a guide to the basics |
|
Container Store, Inc. |
|
TX4279313 |
|
5/3/96 |
Developing independence in your child |
|
Container Store |
|
TX4284282 |
|
5/3/96 |
10% off your next purchasethe Container Store |
|
Container Store, Inc. |
|
TX4315055 |
|
5/24/96 |
The Container Store packing & shipping guide |
|
Container Store, Inc. |
|
TX4315056 |
|
5/24/96 |
The Container Storewell help you organize your closet for springfor free |
|
Container Store, Inc. |
|
TX4315057 |
|
5/24/96 |
Elfa Easy Glider |
|
Container Store, Inc. |
|
TX4315058 |
|
5/24/96 |
Weve sheared 40 to 50% off for our spring closet salethe Container Store |
|
Container Store, Inc. |
|
TX4315059 |
|
5/24/96 |
Title |
|
Owner |
|
Registration No. |
|
Registration Date |
Home sweet homethe Container Store |
|
Container Store, Inc. |
|
TX4315060 |
|
5/24/96 |
Organized Statethe Container Store guide for college-bound students |
|
Container Store, Inc. |
|
TX4315061 |
|
5/24/96 |
Why were your best source for Christmas gifts! The Container Store |
|
Container Store, Inc. |
|
TX4315062 |
|
5/24/96 |
Christmas giving ideas from the Container Store |
|
Container Store, Inc. |
|
TX4315063 |
|
5/24/96 |
VA-VA Voom Storage |
|
Container Store, Inc. |
|
VA1409453 |
|
4/23/07 |
Shoe Storage That Fits Your Style |
|
The Container Store, Inc. |
|
VA1622603 |
|
9/6/07 |
New Hot Fabulous! |
|
The Container Store, Inc. |
|
VA1622612 |
|
9/6/07 |
Wrap It Up! |
|
The Container Store, Inc. |
|
VA1622750 |
|
9/6/07 |
Stocking Stuffer Spectacular! |
|
The Container Store, Inc. |
|
VA1622912 |
|
8/30/07 |
have a grad or know one? |
|
The Container Store, Inc. |
|
VA1629018 |
|
9/6/07 |
Naturally Organized |
|
The Container Store, Inc. |
|
VA1629046 |
|
8/30/07 |
Colorfully Contained |
|
The Container Store, Inc. |
|
VA1629071 |
|
8/30/07 |
Our Annual Storewide Shelving Sale |
|
The Container Store, Inc. |
|
VA1687829 |
|
11/3/08 |
Back to School-Organized! |
|
The Container Store, Inc. |
|
VA1695370 |
|
10/15/08 |
Beautiful Versatile Space-Saving Our Shelving Collection |
|
The Container Store, Inc. |
|
VA1734700 |
|
11/21/08 |
Clearly Artful Storage The Container Store + Umbra |
|
The Container Store, Inc |
|
VA1740006 |
|
6/14/10 |
The Container Store Beautiful Versatile Space-Saving Our Shelving Collection 2009 |
|
The Container Store, Inc. |
|
VA1740007 |
|
6/14/10 |
Tax Time Sale - Organize Before You Itemize |
|
The Container Store, Inc. |
|
VA1740206 |
|
7/26/10 |
Storage for Kids of All Ages |
|
The Container Store, Inc. |
|
VA1740208 |
|
7/26/10 |
The Container Store Our Gift Wrap Wonderland 2008 |
|
The Container Store, Inc. |
|
VA1740494 |
|
6/14/10 |
The Container Store Our Gift Wrap Wonderland 2009 |
|
The Container Store, Inc. |
|
VA1740498 |
|
6/14/10 |
Introducing Elfa Utility |
|
The Container Store, Inc. |
|
VA1743997 |
|
10/22/10 |
Dorm - Give Yourself Some Space |
|
The Container Store, Inc. |
|
VA1744008 |
|
10/22/10 |
Fun Storage For Neat Kids |
|
The Container Store, Inc. |
|
VA1744042 |
|
10/22/10 |
The Container Store elfa Happiness Is An Organized Closet |
|
The Container Store, Inc |
|
VA1745751 |
|
6/14/10 |
10 Easy Ideas for Organizing Your Home |
|
The Container Store, Inc. |
|
VA1746051 |
|
10/28/08 |
Title |
|
Owner |
|
Registration No. |
|
Registration Date |
Shoe Storage That Fits Your Style |
|
The Container Store, Inc. |
|
VA1756697 |
|
1/21/11 |
The Container Store Spring Organization Sale 2011 |
|
The Container Store, Inc. |
|
VA1802676 |
|
6/14/11 |
The Container Store Back To School 2011 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1789295 |
|
8/16/2011 |
The Container Store Happy Organized Home Sale 2011 |
|
The Container Store, inc. d.b.a. The Container Store |
|
VA1786661 |
|
8/16/2011 |
The Container Store Show Off Your Storage 2011 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1785591 |
|
6/14/2011 |
The Container Store Dorm 2010 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1802672 |
|
6/14/2011 |
The Container Store elfa. More Room in Your Closet. More Time in Your Life. More Value Than Ever! |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1752844 |
|
5/3/2010 |
The Container Store Fun Storage For Neat Kids |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1756514 |
|
1/20/2011 |
The Container Store Lifes More Fun When Youre Organized! 2010 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1774418 |
|
6/14/2010 |
The Container Store Love Your Luggage! Our Organized Traveler SALE 2010 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1740496 |
|
6/14/2010 |
The Container Store Our Annual elfa SALE 30% off elfa 30% off installation too! |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1789270 |
|
6/14/2011 |
The Container Store Our Gift Wrap Wonderland 2010 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1801575 |
|
6/14/2011 |
The Container Store Spring Organization Sale |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1752851 |
|
5/3/2010 |
The Container Store Work Smart Office Sale |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1752842 |
|
5/3/2010 |
The Container Store Lifes More Fun When Youre Organized! 2009 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1744039 |
|
10/22/2010 |
The Container Store Organize Before You Itemize Tax Time Sale 2009 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1744000 |
|
10/22/2010 |
The Container Store Organize Your Holiday Treasures |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1756513 |
|
1/20/2011 |
The Container Store Our Annual elfa Sale 30% Off elfa 30% Off elfa Installation |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1752845 |
|
5/3/2010 |
The Container Store Plan It. Pack it. |
|
The Container Store, Inc. |
|
VA1752841 |
|
5/3/2010 |
Title |
|
Owner |
|
Registration No. |
|
Registration Date |
Enjoy It. Our Organized Traveler Sale 2009 |
|
d.b.a. The Container Store |
|
|
|
|
The Container Store Spring Organization Sale 2009 Everything elfa On SALE AGAIN 30% OFF |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1740209 |
|
7/26/2010 |
The Container Store Summer Camp In Organized Style! 2009 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1752848 |
|
5/3/2010 |
The Container Store Back To School 2009 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1752847 |
|
5/3/2010 |
The Container Store EVERYTHING elfa On SALE AGAIN 30% OFF 2009 A Message from Melissa Reiff, President, The Container Store |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1744004 |
|
10/22/2010 |
The Container Store Happy Organized Home Sale 2009 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1752839 |
|
5/3/2010 |
The Container Store Hurry, They Wont Last! Our Fabulous 2009 Stocking Stuffers! |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1742931 |
|
6/14/2010 |
The Container Store Summer Sale 2008 Lifes More Fun When Youre Organized! |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1756512 |
|
1/20/2011 |
The Container Store Hang On! 2008 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1744043 |
|
10/22/2010 |
The Container Store Organize Your Holiday Treasures 2008 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1740495 |
|
6/14/2010 |
The Container Store Something Fun for Everyone! Our 2008 Stocking Stuffer Collection |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1740499 |
|
6/14/2010 |
The Container Store Storage for Kids of All Ages 2008 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1740208 |
|
7/26/2010 |
The Container Store Spring Organization Sale 2008 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA0001744002 |
|
10/22/2010 |
The Container Store The Box Book 2011 Best selection in town Best boxes around |
|
The Container Store, inc. d.b.a. The Container Store |
|
VA1805512 |
|
6/14/2011 |
The Container Store Work Smart Office Sale 2011 |
|
The Container Store, Inc, d/b/a, The Container Store |
|
VA1805525 |
|
6/14/2011 |
The Container Store St. Nicks Top Picks Our 2010 Stocking Stuffers have arrived! |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1805165 |
|
6/14/2011 |
The Container Store elfa Everything can be organized. |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1805511 |
|
6/14/2011 |
Title |
|
Owner |
|
Registration No. |
|
Registration Date |
The Container Store Happy Organized Home Sale 2011 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1805522 |
|
6/14/2011 |
The Container Store Organize Your Holiday Treasures 2010 |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1805543 |
|
6/14/2011 |
The Container Store Our Annual Storewide Shelving Sale 2010 Our Huge Collection is 25% Off! |
|
The Container Store, Inc. d.b.a. The Container Store |
|
VA1805523 |
|
6/14/2011 |
Calais : no. EL030 |
|
Elfa International |
|
VA1219781 |
|
5/15/03 |
Monaco : no. EL029 |
|
Elfa International |
|
VA1219782 |
|
5/15/03 |
Pembrook : no. EL006 |
|
Elfa International, Inc. |
|
VA1223743 |
|
4/23/03 |
Orleans : no. EL037 |
|
Elfa International, Inc. |
|
VA1223744 |
|
4/23/03 |
Waterbury : no. EL048 |
|
Elfa International, Inc. |
|
VA1223745 |
|
4/23/03 |
Pisarro : no. EL004 |
|
Elfa International, Inc. |
|
VA1223746 |
|
4/23/03 |
Glastonbury : no. EL002 |
|
Elfa International, Inc. |
|
VA1223747 |
|
4/23/03 |
Paris : no. EL046 |
|
Elfa International, Inc. |
|
VA1223748 |
|
4/23/03 |
Dijon : no. EL010 |
|
Elfa International, Inc. |
|
VA1223749 |
|
4/23/03 |
Lyon : no. EL008 |
|
Elfa International, Inc. |
|
VA1223750 |
|
4/23/03 |
Milan : no. EL045 |
|
Elfa International, Inc. |
|
VA1223751 |
|
4/23/03 |
Cotswald : no. EL-65 |
|
Elfa International, Inc. |
|
VAu600887 |
|
10/31/03 |
Domain Names
containerstore.biz 1equals3.org
thecontainerstore.biz |
|
1equals3.us |
thecontainerstore.info |
|
1equals3.com |
containorstore.com |
|
containyourselfindy.com |
contanerstore.com |
|
thecontainerstore.net |
contianerstore.com |
|
thecontainerstore.org |
containerstore.info |
|
thecontainerstore.mobi |
containerstore.cc |
|
containerstore.mobi |
thecontainerstore.us |
|
containerstore.co |
containerstore.us |
|
thecontainerstore.co |
containerstore.org |
|
thecontainerstore.xxx |
containerstore.net |
|
containerstore.xxx |
thecontainerstore.com |
|
tcshomedesign.com |
elfanorthamerica.com |
|
TcsAtHomeSolutions.com |
elfanorthamerica.net |
|
TcsAtHomeService.com |
elfamarketing.org |
|
tcsHome.net |
elfamarketing.net |
|
tcsHome.org |
elfanorthamerica.org |
|
tcsHome.biz |
elfamarketing.com |
|
tcsHome.info |
containerstore.com |
|
tcsATHome.net |
container-store.com |
|
tcsATHome.org |
container-stores.com |
|
tcsATHome.biz |
storageandorganization.com |
|
athomeservice.net |
storageandorganization.net |
|
athomeservice.biz |
storageandorganization.org |
|
containerstore.co.uk |
containernmore.com |
|
thecontainerstore.co.uk |
containerandmore.com |
|
containerstore.ca |
containersnmore.com |
|
thecontainerstore.ca |
organizedit.net |
|
mail.containerstore.com |
organizedit.com |
|
siteclarity.containerstore.com |
organizedit.org |
|
|
1equals3.net |
|
|
Intellectual Property License Agreements
In the ordinary course of business, the Companies enter into intellectual property license agreements with vendors. Such intellectual property license agreements are primarily for the use of vendors software.
Schedule 6.12
Guarantors
TCS Holdings, Inc.
TCS Gift Card Services, LLC
TCS Installation Services, LLC
Schedule 6.13
Credit Card Arrangements
Payment Credit Card and Debit Bill Payment Processing Agreement, dated as of August, 2010, between The Container Store, Inc. and Paymentech, L.P.
Payment Credit Card Processing Agreement, dated as of March 9, 2003, between The Container Store, Inc. and American Express Travel Related Services Company, Inc. (AMEX).
Payment Credit Card Processing Agreement, dated September 21, 2005, between The Container Store, Inc. and Discover Financial Services, LLC (Discover).
Schedule 7.01(b)
Existing Liens
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Secured |
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Original |
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Original |
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Amdt. |
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Amdt. File |
Debtor |
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Jurisdiction |
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Party |
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Collateral |
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File Date |
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File Number |
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File Date |
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Number |
The Container Store, Inc. |
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Texas SOS |
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First Sierra Financial, Inc. |
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Leased Equipment |
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10/27/1999 |
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99-217123 |
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07/30/2009 |
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09-00215672 |
The Container Store, Inc. |
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Texas SOS |
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First Sierra Financial, Inc. |
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Leased Equipment |
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01/05/2000 |
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00-402461 |
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10/15/2009 |
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09-00288582 |
The Container Store, Inc. |
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Texas SOS |
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Highline Capital |
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Leased Equipment |
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03/14/2000 |
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00-452932 |
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01/13/2010 |
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10-00011421 |
The Container Store, Inc. |
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Texas SOS |
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Highline Capital |
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Leased Equipment |
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05/22/2000 |
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00-503521 |
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02/09/2010 |
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10-00038218 |
The Container Store, Inc. |
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Texas SOS |
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Wells Fargo Equipment Finance, Inc. |
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Specific Equipment |
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09/16/2003 |
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04-0041933882 |
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07/29/2008 |
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08-00253208 |
The Container Store, Inc. |
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Texas SOS |
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Cisco Systems Capital Corporation |
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Leased Equipment |
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02/27/2004 |
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04-0058709487 |
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02/18/2009 |
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09-00048027 |
The Container Store, Inc. |
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Texas SOS |
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Midfirst Bank |
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Specific Equipment |
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05/09/2007 |
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07-001564987 |
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The Container Store, Inc. |
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Texas SOS |
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Wells Fargo Financial Leasing, Inc. |
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Leased Equipment |
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04/08/2011 |
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11-0010564553 |
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|
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The Container Store, Inc. |
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Texas SOS |
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United Rental Northwest, Inc. |
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Specific Equipment |
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12/07/2011 |
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11-0035598193 |
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|
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The Container Store, Inc. |
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Texas SOS |
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Wells Fargo Financial Leasing, Inc. |
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Leased Equipment |
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01/03/2012 |
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12-0000206778 |
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Schedule 7.02
Existing Indebtedness
Equipment Lease Agreement, dated as of October 16, 2006, between First Equipment Company and The Container Store, Inc., which lease constitutes an approximate aggregate outstanding indebtedness amount of $18,005 as of March 31, 2012.
SW License Lease, dated as of September 2008, between The Container Store, Inc. and Cisco Systems Capitol Corporation, which lease constitutes an approximate aggregate outstanding indebtedness amount of $141,981 as of March 31, 2012.
Agreement to pay, dated as of January 3, 2012, between TCS Installation Services, LLC (TIS) and Elfa Installation Services (EIS), LLC, which constitutes an approximate aggregate outstanding indebtedness of TIS owing to EIS in an amount of $5,958,333 as of March 31, 2012.
Schedule 7.09
Burdensome Agreements
None.
Schedule 11.02
Administrative Agents Office, Certain Addresses for Notices
If to Holdings:
TCS Holdings, Inc.
c/o Leonard Green & Partners, L.P.
11111 Santa Monica Boulevard, Suit 2000
Los Angeles, California 90025
Attention: Timothy Flynn
Telecopier Number: (310) 954-0404
Telephone Number: (310) 954-0444
With a copy to:
The Container Store, Inc.
500 Freeport Parkway
Coppell, Texas 75019
Attention: Natalie Levy
Telecopier Number: (972) 538-7821
Telephone Number: (972) 538-6821
Email Address: nataliel@containerstore.com
Attention: Jeff Longmire
Telecopier Number: (972) 538-7855
Telephone Number: (972) 538-6855
Email Address: jdlongmire@containerstore.com
Attention: Michael Lambeth
Telecopier Number: (972) 538-7858
Telephone Number: (972) 538-6858
Email Address: mlambeth@containerstore.com
If to any other Loan Party:
The Container Store, Inc.
500 Freeport Parkway
Coppell, Texas 75019
Attention: Natalie Levy
Telecopier Number: (972) 538-7821
Telephone Number: (972) 538-6821
Email Address: nataliel@containerstore.com
Attention: Jeff Longmire
Telecopier Number: (972) 538-7855
Telephone Number: (972) 538-6855
Email Address: jdlongmire@containerstore.com
Attention: Michael Lambeth
Telecopier Number: (972) 538-7858
Telephone Number: (972) 538-6858
Email Address: mlambeth@containerstore.com
If to the Administrative Agent, Collateral Agent, L/C Issuer and Swing Line Lender:
JPMorgan Chase Bank, N.A.
Chase Business Credit
10 South Dearborn Street
22nd Floor
Mail Code IL1-1190
Chicago, Illinois 60603
Attention: Olga Prado
Telecopier Number: (312) 377-1091
With copy to:
JPMorgan Chase Bank, N.A.
Chase Business Credit
2200 Ross Avenue, Floor 9-TX1-2921
Dallas, TX 75201
Attention: Andrew Ray
Telecopier Number: (214) 965-2594
Telephone Number: (214) 965-2592
Email Address: andrew.g.ray@jpmchase.com
EXHIBIT A-1
FORM OF COMMITTED LOAN NOTICE
Date:
To: JPMorgan Chase Bank, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among THE CONTAINER STORE, INC., a Texas corporation (the Borrower), the Guarantors party thereto (individually, a Guarantor and, collectively, the Guarantors), the Lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the Administrative Agent) and collateral agent. Capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement.
The Borrower hereby requests a Committed Borrowing(1):
1. On (a Business Day)(2)
2. In the amount of $ (3)
3. Comprised of (Type of Committed Loan)(4)
4. For LIBO Rate Loans: with an Interest Period of months.(5)
(1) A Committed Borrowing must be a borrowing consisting of simultaneous Committed Loans of the same Type and, in the case of LIBO Rate Loans, must have the same Interest Period.
(2) Each notice of a Committed Borrowing must be received by the Administrative Agent not later than 2:00 p.m. (i) three Business Days prior to the requested date of any Borrowing of LIBO Rate Loans, and (ii) one Business Day prior to the requested date of any Borrowing of Base Rate Loans.
(3) Each Borrowing of LIBO Rate Loans must be in a principal amount of $2.0 million or a whole multiple of $1.0 million in excess thereof, and, except as otherwise provided in Sections 2.03(c) and 2.04(c) of the Credit Agreement, each Borrowing of Base Rate Loans must be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.
(4) Committed Loans may be either Base Rate Loans or LIBO Rate Loans. If the Type of Committed Loan is not specified, then the applicable Committed Loans will be made as Base Rate Loans.
The Borrower hereby represents and warrants that (a) the Committed Borrowing requested herein complies with the provisions of Section 2.02 of the Credit Agreement and (b) the conditions specified in Sections 4.02(a) and 4.02(b) of the Credit Agreement have been satisfied on and as of the date of the applicable Committed Borrowing.
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THE CONTAINER STORE, INC., as Borrower | |
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Footnote continued from previous page.
(5) The Borrower may request an Interest Period of one, two, three or six months (or such other period as agreed by the Borrower and all applicable Lenders). If no election of Interest Period is specified, then the Borrower will be deemed to have specified an Interest Period of one month.
EXHIBIT A-2
FORM OF CONVERSION/CONTINUATION NOTICE
Date:
To: JPMorgan Chase Bank, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among THE CONTAINER STORE, INC., a Texas corporation (the Borrower), the Guarantors party thereto (individually, a Guarantor and, collectively, the Guarantors), the Lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the Administrative Agent) and collateral agent. Capitalized terms used but not defined herein shall have the meanings set forth in, the Credit Agreement.
The Borrower hereby requests (select one):
o A conversion of Base Rate Loans to LIBO Rate Loans
o A conversion of LIBO Rate Loans to Base Rate Loans
o A continuation of LIBO Rate Loans
1. On (a Business Day)(1)
2. In the amount of $
3. Comprised of (Type of Committed Loan Converted)(2)
4. For LIBO Rate Loans: with an Interest Period of months.(3)
(1) Each notice of conversion of Committed Loans from one Type to the other or of continuation of LIBO Rate Loans must be received by the Administrative Agent not later than 2:00 p.m. three Business Days prior to the requested date of any conversion to, or continuation of, LIBO Rate Loans or of any conversion of LIBO Rate Loans to Base Rate Loans. If the Borrower fails to give a timely notice of a conversion or continuation, then the applicable Committed Loans shall be made as, or converted to, Base Rate Loans.
(2) Each conversion to, or continuation of, LIBO Rate Loans shall be in a principal amount of $2.0 million or a whole multiple of $1.0 million in excess thereof, and, except as otherwise provided in Sections 2.03(c) and 2.04(c) of the Credit Agreement, each conversion to Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.
The Borrower hereby represents and warrants that the conversion of Committed Loans or the continuation of LIBO Rate Loans requested herein, as the case may be, complies with the provisions of Section 2.02 of the Credit Agreement.
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THE CONTAINER STORE, INC., as Borrower | |
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Footnote continued from previous page.
(3) The Borrower may request an Interest Period of one, two, three or six months (or such other period as agreed by the Borrower and all applicable Lenders). If no election of Interest Period is specified, then the Borrower will be deemed to have specified an Interest Period of one month.
EXHIBIT B
FORM OF SWING LINE LOAN NOTICE
Date:
To: JPMorgan Chase Bank, N.A., as Swing Line Lender
JPMorgan Chase Bank, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among THE CONTAINER STORE, INC., a Texas corporation (the Borrower), the Guarantors party thereto (individually, a Guarantor and, collectively, the Guarantors), the Lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the Administrative Agent) and collateral agent. Capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement.
The Borrower hereby requests a Swing Line Borrowing:
1. On (a Business Day)(1)
2. In the amount of $
The Swing Line Borrowing requested herein complies with the provisions of Section 2.04 of the Credit Agreement.
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THE CONTAINER STORE, INC., as Borrower | |
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(1) Each notice of a Swing Line Borrowing must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the requested date of any Swing Line Borrowing.
EXHIBIT D
FORM OF COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
Date of Certificate:
To: JPMorgan Chase Bank, N.A., as Administrative Agent
Ladies and Gentlemen:
Reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among THE CONTAINER STORE, INC., a Texas corporation (the Borrower), the Guarantors party thereto (individually, a Guarantor and, collectively, the Guarantors), the Lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the Administrative Agent) and collateral agent. Capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement.
The undersigned, in his or her capacity as a duly authorized and acting Responsible Officer of Holdings, hereby certifies on behalf of Holdings and each of the other Loan Parties as of the date hereof the following:
1. No Defaults or Events of Default.
[Since (the date of the last similar certification), no Default or Event of Default has occurred.]
[A Default or Event of Default has occurred since (the date of the last similar certification). The Loan Parties have taken or propose to take those actions with respect to such Default or Event of Default as described on said Appendix I.]
2. Financial Calculations. Attached hereto as Appendix II are reasonably detailed calculations with respect to the Consolidated Fixed Charge Coverage Ratio (determined for purposes of Section 7.15 of the Credit Agreement) on a trailing four quarter basis, as of the Fiscal Quarter ending .(1)
(1) To be delivered together with the financial statements of Holdings and its Subsidiaries pursuant to Section 6.01(a), Section 6.01(b) or Section 6.01(c) of the Credit Agreement but tested pursuant to Section 7.15 of the Credit Agreement only during a Covenant Compliance Event.
3. Financial Statements.
[Use following paragraph (a) for fiscal year-end financial statements]
(a) Attached hereto as Appendix III are the audited financial statements of Holdings and its Subsidiaries required by Section 6.01(a) of the Credit Agreement for the Fiscal Year ending , and the related Consolidated statements of income or operations, shareholders equity (if available) and cash flows for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all in reasonable detail, audited and accompanied by a report and opinion of Ernst & Young, LLP or another Registered Public Accounting Firm of nationally recognized standing reasonably satisfactory to the Administrative Agent, which report and opinion has been prepared in accordance with the requirements of Section 6.01(a) of the Credit Agreement. Also attached hereto as Appendix III are the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries and variable interest entities (if any) from such financial statements.
[Use following paragraph (b) for fiscal quarter-end financial statements]
(b) Attached hereto as Appendix III are the unaudited financial statements of Holdings and its Subsidiaries required by Section 6.01(b) of the Credit Agreement for the Fiscal Quarter ending , and the related Consolidated statements of income or operations and cash flows for such Fiscal Quarter and for the portion of Holdings Fiscal Year then ended, all in reasonable detail, setting forth in each case in comparative form the figures for the corresponding Fiscal Quarter of the previous Fiscal Year and the corresponding portion of the previous Fiscal Year and to the figures as set forth in the projections delivered pursuant to Section 6.01(d). Also attached hereto as Appendix III are the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries and variable interest entities (if any) from such financial statements.
(c) The financial statements furnished to the Administrative Agent for the [Fiscal Year/Fiscal Quarter] ending were prepared in accordance with GAAP and present fairly in all material respects the financial condition, results of operations, shareholders equity (if available) and cash flows of Holdings and its Subsidiaries on a Consolidated basis, as of the end of the period(s) covered, subject only to, with respect to the quarterly financial statements, normal year-end adjustments, including, but not limited to, purchase accounting adjustments, and the absence of footnotes.
4. Locations of Collateral. Attached hereto as Appendix IV is a description of any change in the location of any office in which a Loan Party maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility).
5. Management Discussion. Attached hereto as Appendix V is a narrative prepared by management of Holdings, in accordance with Section 6.01(e) of the Credit Agreement, with respect to the financial statements delivered herewith.
6. List of Subsidiaries. Attached hereto as Appendix VI is a list of each Subsidiary that identifies each Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary as of the date of this Compliance Certificate.
IN WITNESS WHEREOF, a duly authorized and acting Responsible Officer of Holdings, on behalf of Holdings and each of the other Loan Parties, has duly executed this Compliance Certificate as of , 20 .
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HOLDINGS: | |
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TCS HOLDINGS, INC. | |
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APPENDIX I
The following describes the nature of the Default or Event of Default in reasonable detail and the steps, if any, being taken or contemplated by the Loan Parties to be taken on account thereof.
APPENDIX II
Consolidated Fixed Charge Coverage Ratio
1. Consolidated EBITDA for such Measurement Period:
(a) Consolidated Net Income of Holdings and its Restricted Subsidiaries for the most recently completed Measurement Period:
Plus the following, to the extent deducted in calculating Consolidated Net Income for such Measurement Period:
(b) Consolidated Interest Charges:
(c) provision for Federal, state, local and foreign income taxes:
(d) depreciation and amortization expense:
(e) non-cash stock compensation paid to officers, directors, employees or consultants:
(f) all non-cash losses from Dispositions other than Dispositions of inventory in the ordinary course of business:
(g) Transaction Expenses:
(h) expenses incurred in connection with the prepayment, amendment, or refinancing of Indebtedness:
(i) non-cash expenses related to LIFO/LCM reserves and non-cash rent:
(j) any non-cash purchase accounting adjustments made in connection with any acquisition permitted by the Credit Agreement:
(k) expenses incurred in connection with closed stores, store closings and store relocations in an amount not to exceed $5.0 million in the aggregate in such Measurement Period:
(l) Management Fees:
(m) all transactional costs, expenses and charges payable to non-Affiliated third parties and made at the time of, and in connection with, any acquisition (whether or not consummated) in an amount not to exceed $5.0 million in the aggregate during such Measurement Period:
(n) any expenses or charges related to any issuance of Equity Interests, Investment, acquisition, disposition, recapitalization or the incurrence or repayment of Indebtedness (including with respect to Indebtedness, a refinancing thereof, whether or not successful), in each case permitted to be incurred or made under the Credit
Agreement and any amendment or modification to the terms of any such transactions, including such fees, expenses or charges related to the Transaction:
(o) non-cash losses (minus any non-cash gains) with respect to Swap Contracts:
(p) extraordinary, unusual or non-recurring expenses, charges or losses during such period (as determined by the Borrower in good faith, it being understood that Item 10(e) of Regulation S-K under the Securities Act shall not constitute a limitation on any such determination):
(q) pre-opening and grand opening expenses in an amount not to exceed $10.0 million in such Measurement Period:
Minus, the following:
(r) to the extent included in calculating Consolidated Net Income for such Measurement Period, all non-recurring, non-cash items increasing Consolidated Net Income, excluding any non-cash items that result in an accrual of a reserve for cash items in any future period, (in each case of or by Holdings and its Restricted Subsidiaries for such Measurement Period):
(s) non-cash gains from Dispositions other than Dispositions of inventory in the ordinary course of business:
(t) Consolidated EBITDA [The sum of Lines 1(a) through 1(q) minus the sum of Lines 1(r) and 1(s)]:(1)
2. Plus for the purposes of Section 7.15 only, Specified Equity Contributions made during such Measurement Period:
3. Minus:
Capital Expenditures made during such Measurement Period:
4. CASH FLOW AVAILABLE FOR FIXED CHARGES
[The sum of Line 1(t) plus Line 2 minus Line 3]:
5. Debt Service Charges for such Measurement Period:
(a) Consolidated Interest Charges paid in cash or required to be paid in cash:
(1) Consolidated EBITDA shall be deemed to be $24,906,050, $7,621,086, $16,544,906 and $21,820,837 for the Fiscal Quarters ended February 26, 2011, May 28, 2011, August 27, 2011 and November 26, 2011, respectively (without pro forma adjustments for the acquisition of TCS Installation Services, LLC).
Plus
(b) principal payments made or required to be made on account of Indebtedness (excluding the (i) Obligations, (ii) any Synthetic Lease Obligations and (iii) any principal payments required to be made with respect to the Term Facility solely as a result of any excess cash flow mandatory prepayment requirement under the Term Facility, but including, without limitation, any Capital Lease Obligations):
(c) Debt Service Charges [The sum of Lines 5(a) and 5(b)]:
Plus:
6. Aggregate amount of all scheduled mandatory cash payments on Disqualified Equity Interests made of or by Holdings and its Restricted Subsidiaries:
7. FIXED CHARGES [The sum of Line 5 and Line 6]:
8. CONSOLIDATED FIXED CHARGE COVERAGE RATIO [Line 4 divided by Line 7]:
EXHIBIT E
FORM OF NOTE
NOTE
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New York, New York |
FOR VALUE RECEIVED, THE CONTAINER STORE, INC., a Texas corporation (Borrower), promises to pay to (hereinafter, with any subsequent holders, the Lender), c/o the Administrative Agent, the principal sum of DOLLARS ($ ), or, if less, the aggregate unpaid principal balance of Loans made by the Lender to or for the account of the Borrower pursuant to the Credit Agreement dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among Borrower, the Guarantors party thereto (individually, a Guarantor and, collectively, the Guarantors), JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties, JPMorgan Chase Bank, N.A., as collateral agent (in such capacity, the Collateral Agent) for its own benefit and the benefit of the other Credit Parties, and the lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), with interest at the rate and payable in the manner stated therein.
This is a Note to which reference is made in the Credit Agreement and is subject to all terms and provisions thereof. The principal of, and interest on, this Note shall be payable at the times, in the manner, and in the amounts as provided in the Credit Agreement and shall be subject to prepayment and acceleration as provided therein. Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
The Administrative Agents books and records concerning the Loans, the accrual of interest thereon, and the repayment of such Loans, shall be prima facie evidence of the indebtedness to the Lender hereunder.
No delay or omission by any Agent or the Lender in exercising or enforcing any of such Agents or the Lenders powers, rights, privileges, remedies, or discretions hereunder shall operate as a waiver thereof on that occasion nor on any other occasion. No waiver of any Event of Default shall operate as a waiver of any other Event of Default, nor as a continuing waiver of any such Event of Default.
The Borrower, and each endorser and guarantor of this Note, waives presentment, demand, notice, and protest, and also waives any delay on the part of the holder hereof. The Borrower assents to any extension or other indulgence (including, without limitation, the release or substitution of Collateral) permitted by any Agent and/or the Lender with respect to this Note and/or any Collateral or any extension or other indulgence with respect to any other liability or
any collateral given to secure any other liability of the Borrower or any other Person obligated on account of this Note.
This Note shall be binding upon the Borrower, and each endorser and guarantor hereof, and upon their respective successors, assigns, and representatives, and shall inure to the benefit of the Lender and its successors, endorsees, and assigns.
The liabilities of the Borrower, and of any endorser or guarantor of this Note, are joint and several, provided, however, the release by any Agent or the Lender of any one or more such Persons shall not release any other Person obligated on account of this Note. Each reference in this Note to the Borrower, any endorser, and any guarantor, is to such Person individually and also to all such Persons jointly. No Person obligated on account of this Note may seek contribution from any other Person also obligated unless and until all of the Obligations have been paid in full in cash.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
THE BORROWER 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 COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE BORROWER 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. THE BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS NOTE OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS NOTE OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
THE BORROWER 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 NOTE OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO ABOVE. THE BORROWER 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.
The Borrower makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Agents and the Lender, in the establishment and maintenance of their respective relationship with the Borrower contemplated by this Note, are each relying thereon. THE BORROWER, EACH GUARANTOR, ENDORSER AND SURETY, AND THE LENDER, BY ITS ACCEPTANCE HEREOF, 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 NOTE OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). THE BORROWER (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 THE AGENTS AND THE LENDER HAVE BEEN INDUCED TO ENTER INTO THE CREDIT AGREEMENT AND THIS NOTE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed as of the date set forth above.
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EXHIBIT F
FORM OF ASSIGNMENT AND ASSUMPTION
Reference is made to the Credit Agreement dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among, The Container Store, Inc., a Texas corporation ( Borrower), the Guarantors party thereto (individually, a Guarantor and, collectively, the Guarantors), JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties, JPMorgan Chase Bank, N.A., as collateral agent (in such capacity, the Collateral Agent) for its own benefit and the benefit of the other Credit Parties, and the lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders). Capitalized terms used herein and not defined herein shall have the meanings assigned to such terms in the Credit Agreement.
(the Assignor) and (the Assignee) agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, that interest in and to the Assignors rights and obligations as a Lender under the Credit Agreement as of the date hereof (including, without limitation, such interest in each of the Assignors outstanding Commitments, if any, and the Loans (and related Obligations) owing to it) specified in Section 1 of Schedule I hereto. After giving effect to such sale and assignment, the Assignors and the Assignees Commitments and the amount of the Loans owing to the Assignor and the Assignee and the amount of Letters of Credit participated in by the Assignor and the Assignee will be as set forth in Section 2 of Schedule I hereto.
2. The Assignor: (a) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Liens and that it is legally authorized to enter into this Assignment and Assumption; (b) makes no representation or warranty and 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 or any other instrument or document furnished pursuant thereto, or (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant thereto; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant thereto; and (d) confirms, in the case of an Assignee who is not a Lender, an Affiliate of a Lender, or an Approved Fund, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the Assignor subject to this Assignment and Assumption, is not less than $1.0 million (and in integral multiples of $1.0 million in excess thereof), and after giving
effect thereto, the Assignor shall hold a Commitment of at least $1.0 million, unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
3. The Assignee: (a) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 6.01 thereof 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; (b) agrees that it will, independently and without reliance upon the Administrative 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 Credit Agreement; (c) appoints and authorizes the Agents to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Agents by the terms thereof, together with such powers as are reasonably incidental thereto; (d) agrees that it will perform in accordance with their terms all of the obligations which, by the terms of the Credit Agreement, are required to be performed by it as a Lender; (e) specifies as its lending office (and address for notices) the office set forth beneath its name on the signature pages hereof; (f) if it is a Fee Recipient, confirms that it is a Permitted Investor, and attached hereto is the documentation it is required to deliver pursuant to the terms of the Credit Agreement, duly completed and executed by such Permitted Investor, (g) agrees that, if the Assignee is a Foreign Lender entitled to an exemption from, or reduction of, withholding tax under the law of the jurisdiction in which the applicable Loan Party is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments under the Credit Agreement or under any other Loan Document, it shall deliver to the Loan Parties and the Administrative Agent (in such number of copies as shall be requested by the recipient) whichever of the following is applicable: (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States is a party, (ii) duly completed copies of Internal Revenue Service Form W-8ECI, (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (A) a U.S. Tax Certificate in the form of Exhibit M-1, Exhibit M-2, Exhibit M-3 or Exhibit M-4 to the Credit Agreement (the U.S. Tax Certificates) and (B) duly completed copies of Internal Revenue Service Form W-8BEN, (iv) to the extent a Foreign Lender is not the beneficial owner (for example, where the Foreign Lender is a partnership or participating Lender granting a typical participation), Internal Revenue Service Form W-8IMY, accompanied by a Form W-8ECI, W-8BEN, U.S. Tax Compliance Certificate, Form W-9 or Form W-8IMY from each beneficial owner, as applicable, or (v) any other form prescribed by applicable Law as a basis for claiming exemption from, or a reduction in, United States federal withholding tax, duly completed, together with such supplementary documentation as may be prescribed by applicable Law to permit the Borrower to determine the withholding or deduction required to be made; and (h) represents and warrants that it is an Eligible Assignee.
4. Following the execution of this Assignment and Assumption by the Assignor and the Assignee, it will be delivered, together with a processing and recordation
fee in the amount of $3,500 (unless such fee has been waived by the Administrative Agent in its sole discretion), to the Administrative Agent for acceptance and recording by the Administrative Agent. The effective date of this Assignment and Assumption shall be the date of acceptance thereof by the Administrative Agent, unless otherwise specified on Schedule I hereto (the Effective Date).
5. Upon such acceptance and recording by the Administrative Agent and, to the extent required by Section 11.06(b)(iii) of the Credit Agreement, consent by the Administrative Agent, the Borrower, the L/C Issuer, and/or the Swing Line Lender, as applicable (such consent not to be unreasonably withheld or delayed), from and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent of the interest assigned by this Assignment and Assumption, shall have the rights and obligations of a Lender under the Credit Agreement, and (b) the Assignor shall, to the extent of the interest assigned by this Assignment and Assumption, be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Administrative Agent, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves.
7. This Assignment and Assumption shall be governed by, and be construed in accordance with, the laws of the State of New York.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption to be executed by their respective officers thereunto duly authorized, as of the date first above written.
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[ASSIGNOR] | |
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By: |
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Name: |
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Title: |
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[ASSIGNEE] | |
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By: |
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Name: |
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Title: |
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Lending Office (and address for notices): | |
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[Address] |
Acknowledged and, to the extent required by Section 11.06(b)(i)(B) or Section 11.06(b)(iii) of the Credit Agreement, consented to, this day of .
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ADMINISTRATIVE AGENT: | |
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JPMORGAN CHASE BANK, N.A. | |
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By: |
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Name: |
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Title: |
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Acknowledged and, to the extent required by Section 11.06(b)(i)(B) or Section 11.06(b)(iii) of the Credit Agreement, consented to, this day of .
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BORROWER: | |
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THE CONTAINER STORE, INC.(1) | |
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By: |
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Name: |
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Title: |
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(1) Include as required by the Credit Agreement.
Acknowledged and, to the extent required by Section 11.06(b)(i)(B) or Section 11.06(b)(iii) of the Credit Agreement, consented to, this day of .
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SWING LINE LENDER: | |
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JPMORGAN CHASE BANK, N.A. | |
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By: |
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Name: |
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Title: |
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Acknowledged and, to the extent required by Section 11.06(b)(i)(B) or Section 11.06(b)(iii) of the Credit Agreement, consented to, this day of .
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L/C ISSUER | |
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JPMORGAN CHASE BANK, N.A. | |
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Schedule I
to
Assignment and Assumption
Section 1. Percentage/Amount of Commitments/Loans/Letters of Credit Assigned by Assignor to Assignee. |
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Applicable Percentage assigned by Assignor: |
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% |
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Commitment assigned by Assignor: |
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$ |
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Aggregate Outstanding Principal Amount of Loans assigned by Assignor: |
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$ |
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Aggregate Participations assigned by Assignor in L/C Obligations: |
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$ |
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Section 2. Percentage/Amount of Commitments/Loans/Letters of Credit Held by Assignor and Assignee after giving effect to Assignment and Assumption. |
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Assignors Applicable Percentage: |
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% |
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Assignees Applicable Percentage: |
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% |
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Assignors Commitment: |
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$ |
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Assignees Commitment: |
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$ |
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Aggregate Outstanding Principal Amount of Loans Owing to Assignor: |
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$ |
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Aggregate Outstanding Principal Amount of Loans Owing to Assignee: |
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$ |
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Aggregate Participations by Assignor in L/C Obligations: |
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$ |
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Aggregate Participations by Assignee in L/C Obligations: |
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$ |
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Section 3. Effective Date: |
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EXHIBIT H-1
FORM OF PERFECTION CERTIFICATE
[ ], 2012
Reference is hereby made to (i) that certain Security Agreement dated as of the date hereof (the Term Loan Security Agreement), among The Container Store, Inc., a Texas corporation (the Term Loan Borrower), the Guarantors party thereto (the Term Loan Guarantors) and the Term Loan Agent (as hereinafter defined); (ii) that certain Credit Agreement dated as of the date hereof (the Term Loan Credit Agreement) among the Term Loan Borrower, TCS Holdings, Inc., a Delaware corporation (Holdings), the Term Loan Guarantors, the lenders from time to time party thereto (the Term Lenders) and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (in such capacity, the Term Loan Agent); (iii) that certain Security Agreement dated as of the date hereof (the ABL Security Agreement, and together with the Term Loan Security Agreement, the Security Agreements), among The Container Store, Inc., a Texas corporation (the ABL Borrower), the Guarantors party thereto (collectively, the ABL Guarantors) and the ABL Agent (as hereinafter defined); and (iv) that certain Credit Agreement dated as of the date hereof (the ABL Credit Agreement, and together with the Term Loan Credit Agreement, the Credit Agreements) among the ABL Borrower, the ABL Guarantors, the lenders from time to time party thereto (the ABL Lenders) and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (in such capacity, the ABL Agent). Capitalized terms used but not defined herein have the meanings assigned in the Credit Agreements.
As used herein, the term Companies means Holdings, the Term Loan Borrower, the ABL Borrower, the Term Loan Guarantors, the ABL Guarantors and each of their respective domestic Subsidiaries.
Each of the undersigned hereby certifies with respect to each Company to the ABL Agent and the Term Loan Agent as follows:
1. Names.
(a) The exact legal name of each Company, as such name appears in its respective certificate of incorporation or any other organizational document, is set forth in Schedule 1(a). Each Company is (i) the type of entity disclosed next to its name in Schedule 1(a) and (ii) a registered organization except to the extent disclosed in Schedule 1(a). Also set forth in Schedule 1(a) is the organizational identification number, if any, of each Company that is a registered organization, the Federal Taxpayer Identification Number of each Company and the jurisdiction of formation of each Company.
(b) Set forth in Schedule 1(b) hereto is any other corporate or organizational names each Company has had in the past five years, together with the date of the relevant change.
(c) Set forth in Schedule 1(c) is a list of all other names (including trade names or similar appellations) used by each Company, or any other business or organization to which each Company became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise, at any time within the five years preceding the date hereof. Also set forth in Schedule 1(c) is the information required by Section 1 of this certificate for any other business or organization to which each Company became the successor by merger, consolidation, acquisition, change in form, nature or jurisdiction of organization or otherwise, at any time within the five years preceding the date hereof.
2. Current Locations.
(a) The chief executive office of each Company is located at the address set forth in Schedule 2(a) hereto.
(b) Set forth in Schedule 2(b), are all locations where each Company maintains (i) any books or records relating to the Collateral or (ii) any of the Collateral consisting of inventory or equipment having an aggregate value in excess of $250,000.
(c) Set forth in Schedule 2(c) hereto are the names and addresses of all persons or entities other than each Company, such as lessees, consignees, warehousemen or purchasers of chattel paper, which have possession or are intended to have possession of any of the Collateral consisting of instruments, chattel paper, inventory or equipment having an aggregate value in excess of $250,000.
(d) Set forth in Schedule 2(d) hereto are the names and addresses of any customs broker or carrier which has possession or is intended to have possession of any of the Collateral consisting of instruments, chattel paper, inventory or equipment having an aggregate value in excess of $250,000.
3. Extraordinary Transactions. Except for those purchases, acquisitions and other transactions described on Schedule 3 attached hereto, all of the Collateral has been originated by each Company in the ordinary course of business or consists of goods which have been acquired by such Company in the ordinary course of business from a person in the business of selling goods of that kind.
4. File Search Reports. Attached hereto as Schedule 4 are file search reports from (A) the Uniform Commercial Code filing offices and the state and local filing offices for tax and judgment liens (i) in each jurisdiction identified in Section 1(a), Section 2(a) or Section 2(b)(i) with respect to each legal name set forth in Section 1 and (ii) in each jurisdiction described in Schedule 1(c) or Schedule 3 relating to any of the transactions described in Schedule (1)(c), or Schedule 3 with respect to each legal name of the person or entity from which each Company purchased or otherwise acquired any of the Collateral. A true copy of each financing statement, including judgment and tax liens, bankruptcy and pending lawsuits or other filing identified in such file search reports has been delivered to each of the ABL Agent and the Term Loan Agent.
5. Real Property. Attached hereto as Schedule 5(a)(i) is a list of all real property owned by any Company. Attached hereto as Schedule 5(a)(ii), is a list of each Companys distribution centers. Attached hereto as Schedule 5(a)(iii) is a list of each Companys leased real property. Except as described on Schedule 5(b), attached hereto, no Company has any Leases which require the consent of the landlord, tenant or other party thereto to the Transactions.
6. Stock Ownership and Other Equity Interests. Attached hereto as Schedule 6(a), is a true and correct list of each of all of the authorized, and the issued and outstanding, stock, partnership interests, limited liability company membership interests or other equity interest of each Company and its domestic and first-tier foreign Subsidiaries and the record and beneficial owners of such stock, partnership interests, membership interests or other equity interests setting forth the percentage of such equity interests pledged under the Security Agreements. Set forth on Schedule 6(b) is each other equity investment of each Company and of each Foreign Subsidiary.
7. Instruments and Tangible Chattel Paper. Attached hereto as Schedule 7 is a true and correct list of all promissory notes, instruments (other than checks to be deposited in the ordinary course of business), tangible chattel paper, electronic chattel paper and other evidence of indebtedness held by each Company as of the date hereof, including all intercompany notes between or among any two or more Companies, in each case having a value in excess of $500,000 (or with respect to all such instruments and chattel paper, having an aggregate face value in excess of $2,000,000).
8. Intellectual Property. Attached hereto as Schedule 8(a) is a schedule setting forth all of each Companys United States Patents, Patent Licenses, Trademarks and Trademark Licenses (each as defined in the Intellectual Property Security Agreements) registered with the PTO (as defined in the Intellectual Property Security Agreements). Attached hereto as Schedule 8(b), is a schedule setting forth all of each Companys United States Copyrights and Copyright Licenses (each as defined in the Intellectual Property Security Agreements), including the name of the registered owner and the registration number of each Copyright or Copyright License owned by each Company.
9. Commercial Tort Claims. Attached hereto as Schedule 9 is a true and correct list of all Commercial Tort Claims (as defined in the Security Agreements) in an individual amount in excess of $500,000 held by each Company, including a brief description thereof.
10. Deposit Accounts, Securities Accounts and Commodity Accounts. Attached hereto as Schedule 10 is a true and complete list of all Deposit Accounts, Securities Accounts, Commodity Accounts (each as defined in the Security Agreements) and credit card arrangements maintained by each Company, including the name of each institution where each such account is held, the name of each such account and the name of each entity that holds each account. Each Deposit Account that is an Excluded Account (each as defined in the Security Agreements) is identified as such on Schedule 10.
11. Letter-of-Credit Rights. Attached hereto as Schedule 11 is a true and correct list of all Letters of Credit with an individual face value in excess of $500,000 issued in
favor of each Company, as beneficiary thereunder (or with respect to all such Letters of Credit, having an aggregate face value in excess of $2,000,000).
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, we have hereunto signed this Perfection Certificate as of the date first written above.
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THE CONTAINER STORE, INC. | |
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By: |
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Name: |
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Title: |
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TCS HOLDINGS, INC. | |
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By: |
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Name: |
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Title: |
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TCS GIFT CARD SERVICES, LLC | |
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By: |
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Name: |
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Title: |
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TCS INSTALLATION SERVICES, LLC | |
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By: |
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Name: |
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Title: |
EXHIBIT H-2
FORM OF PERFECTION CERTIFICATE SUPPLEMENT
This Perfection Certificate Supplement, dated as of [ ], 20[ ], is delivered pursuant to (i) Section 6.02(e)(iii) of that certain Credit Agreement dated as of April 6, 2012 (the Term Loan Credit Agreement) among The Container Store, Inc., a Texas corporation (Term Loan Borrower), the Guarantors party thereto (the Term Loan Guarantors), the lenders from time to time party thereto (the Term Lenders) and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (in such capacity, the Term Loan Agent) and that certain Security Agreement dated as of April 6, 2012 (the Term Loan Security Agreement), among the Term Loan Borrower, the Term Loan Guarantors and the Term Loan Agent; and (ii) Section [ ] of that certain that certain Credit Agreement dated as of April 6, 2012 (the ABL Credit Agreement, and together with the Term Loan Credit Agreement, the Credit Agreements) among The Container Store, Inc., a Texas corporation (the ABL Borrower), the Guarantors party thereto (collectively, the ABL Guarantors), the lenders from time to time party thereto (the ABL Lenders) and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (in such capacity, the ABL Agent) and that certain Security Agreement dated as of April 6, 2012 (the ABL Security Agreement), among the ABL Borrower, the ABL Guarantors and the ABL Agent. Capitalized terms used but not defined herein have the meanings as-signed in the applicable Credit Agreement.
As used herein, the term Companies means Holdings, the Term Loan Borrower, the ABL Borrower, the Term Loan Guarantors, the ABL Guarantors and each of their respective Domestic Subsidiaries.
Each of the undersigned hereby certifies (in his/her capacity as [ ] and not in his/her individual capacity) to each of the Term Loan Agent and the ABL Agent, as applicable, that, as of the date hereof, there has been no change in the information described in the Perfection Certificate delivered on the Closing Date (as supplemented by any perfection certificate supplements delivered prior to the date hereof, the Prior Perfection Certificate), other than as follows:
1. Names.
(a) Schedule 1(a).
2. Current Locations.
(a) Schedule 2(a).
(b) Schedule 2(b).
(c) Schedule 2(c).
(d) Schedule 2(d).
3. Extraordinary Transactions.
Schedule 3.
4. [Intentionally Omitted].
5. Real Property.
(a) Schedule 5(a)(i), Schedule 5(a)(ii) and Schedule 5(a)(iii).
(b) Schedule 5(b).
6. Stock Ownership and Other Equity Interests.
(a) Schedule 6(a).
(b) Schedule 6(b).
7. Instruments and Tangible Chattel Paper.
Schedule 7.
8. Intellectual Property.
(a) Schedule 8(a).
(b) Schedule 8(b).
9. Commercial Tort Claims.
Schedule 9.
10. Deposit Accounts, Securities Accounts and Commodity Accounts.
Schedule 10.
11. Letter-of-Credit Rights.
Schedule 11.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, we have hereunto signed this Perfection Certificate as of this day of [ ], 20[ ].
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THE CONTAINER STORE, INC. | |
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By: |
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Name: |
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Title: |
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TCS HOLDINGS, INC. | |
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By: |
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Name: |
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Title: |
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TCS GIFT CARD SERVICES, LLC, | |
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By: |
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Name: |
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Title: |
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TCS INSTALLATION SERVICES, LLC, as a Guarantor | |
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By: |
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Name: |
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Title: |
EXHIBIT I
A. Credit Card Receivables Component (page 2 of 4) |
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$ |
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B. Inventory Component (page 3 of 4) |
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$ |
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C. Availability Reserves (page 4 of 4) |
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$ |
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D. Borrowing Base (lines A + B - C) |
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$ |
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E. Lower of Borrowing Base (line D) and Aggregate Commitments ($75,000,000) |
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$ |
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Revolving Credit Outstandings: |
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F. Revolving Loans |
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$ |
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G. Letters of Credit |
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$ |
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H. Total outstanding Credit Extensions (lines F + G) |
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$ |
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I. Excess Availability (lines E - H) |
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$ |
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Officers Certification:
Pursuant to the Credit Agreement dated as of April 6, 2012 (as amended from time to time), the undersigned Responsible Officer (as defined in the Credit Agreement) of The Container Store, Inc. certifies that the information provided in this certificate to JPMorgan Chase Bank, N.A., as Collateral Agent, is true and correct based on the accounting records of The Container Store, Inc.
The Container Store, Inc.
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Name: Natalie Levy |
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Date |
Title: Vice President of Accounting |
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SIGNATURE PAGE
BORROWING BASE CERTIFICATE- THE CONTAINER STORE, INC.
The Container Store, Inc.
Borrowing Base Certificate
For the period ended [ ] [ ], 201[ ] (in $000s)
A. Gross credit card receivable per aging: |
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$ |
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Less ineligibles: |
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B. > 5 Business Days Outstanding |
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$ |
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C. Dispute / Offset / Chargeback |
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$ |
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D. No title / no first priority interest |
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$ |
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E. Merchant / processor fees |
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$ |
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F. Other (per terms of Credit Agreement) |
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$ |
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G. Total ineligibles (sum of lines B through F): |
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$ |
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H. Eligible Accounts Receivable (lines A - G): |
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$ |
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I. Advance rate |
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90 |
% |
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Credit Card Receivables Component (lines H x I): |
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$ |
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The Container Store, Inc.
Borrowing Base Certificate
For the period ended [ ] [ ], 201[ ] (in $000s)
Inventory Not in Transit |
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A. Inventory per perpetual: |
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$ |
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Less ineligibles: |
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B. Not solely owned/leased/not valid title |
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$ |
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C. Non-merchandise |
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$ |
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D. Non-appraised acquisition inventory |
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$ |
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E. No First Lien / Perfected Security |
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$ |
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F. Slow-moving/Obsolete |
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$ |
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G. Damage/RTV Inventory |
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$ |
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H. Customer Prepaids |
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$ |
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I. Other (per terms of Credit Agreement) |
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$ |
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J. Total Ineligible (sum of lines B through I) |
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$ |
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K. Total Eligible Not in Transit Inventory (line A J) |
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$ |
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L. In Transit Inventory |
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$ |
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M. In-Transit ineligibles |
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$ |
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N. Subtotal Eligible In-Transit Inventory (line L M) |
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$ |
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O. In Transit Cap(1) |
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$ |
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P. Total Eligible In Transit Inventory (Lesser of line N and line O) |
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$ |
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Q. Total Eligible Inventory (line K + P) |
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$ |
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Inventory Reserves |
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R. Freight and Customs |
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$ |
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S. Other (per terms of Credit Agreement) |
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$ |
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T. Total Inventory Reserves (line R + S) |
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$ |
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U. Net Eligible Inventory (line Q T) |
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$ |
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V. Line U multiplied by Appraised Value Percentage of %(2) |
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$ |
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W. Inventory Component (line V multiplied by 90%) |
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$ |
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(1) Not to exceed 15% of Line Q (January 1 September 30) or 30% of Line Q (October 1 December 31).
(2) Appraised Value Percentage means the net appraised recovery value of the Borrowers and the Subsidiary Guarantors Inventory as set forth in the Borrowers accounting ledger (expressed as a percentage of the cost of such Inventory) as reasonably determined from time to time by reference to the most recent appraisal received by the Administrative Agent conducted by an independent appraiser reasonably satisfactory to the Administrative Agent.
The Container Store, Inc.
Borrowing Base Certificate
For the period ended [ ] [ ], 201[ ] (in $000s)
Availability Reserves |
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A. Sales Tax Reserves |
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$ |
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B. Rent Reserves (collateral access) |
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$ |
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C. Rent Reserves (past due rent) |
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$ |
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D. 50% of Customer Credit Liabilities (gift cards) |
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$ |
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E. Cash Management and Hedging Reserves |
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$ |
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F. Other (per Credit Agreement) |
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$ |
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G. Total Availability Reserves (sum of lines A through F) |
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$ |
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EXHIBIT J
CREDIT CARD NOTIFICATION
[ ], 2012
BY CERTIFIED MAIL RETURN RECEIPT REQUESTED
To: |
[Name and Address of Credit Card Processor] | |
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(the Processor) | |
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Re: |
[The Container Store, Inc.] |
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Merchant Account Number: |
Dear Sir/Madam:
[THE CONTAINER STORE, INC.], a [Texas] corporation with its principal executive offices at 500 Freeport Parkway Coppell, TX 75019 (the Borrower/Loan Party), among others, has entered into separate financing agreements with each of (a) JPMORGAN CHASE BANK, N.A., a national banking association with offices at 10 South Dearborn Street, 22nd Floor, Mail Code IL1-1190, as collateral agent (in such capacity herein, the ABL Collateral Agent) for its own benefit and the benefit of a syndicate of revolving lenders and certain other credit parties (the ABL Credit Parties) which are making loans or furnishing other financial accommodations to [the Borrower/The Container Store, Inc., a Texas corporation (the Borrower), and the Loan Party], and (b) JPMORGAN CHASE BANK, N.A., a national banking association having an office at 1111 Fannin Street, 10th Floor, Houston, TX 77002, as collateral agent (in such capacity herein, the Term Loan Collateral Agent) for its own benefit and the benefit of a syndicate of term lenders and certain other credit parties (the Term Loan Credit Parties) which are making loans to [the Borrower/the Borrower and the Loan Party], pursuant to which agreements the [Borrower/Loan Party], among others, has granted to the ABL Collateral Agent, for its own benefit and the benefit of the other ABL Credit Parties, and to the Term Loan Collateral Agent, for its own benefit and the benefit of the other Term Loan Credit Parties, a security interest in and to, among other things, substantially all of the assets of the [Borrower/Loan Party] (the Collateral), including, without limitation, all credit card charges submitted by the [Borrower/Loan Party] to the Processor for processing and all amounts which the Processor owes to the [Borrower/Loan Party] on account thereof (the Credit Card Proceeds).
Until such time as the Processor receives written notification from the ABL Collateral Agent that the obligations of the [Borrower/Loan Party] to the ABL Collateral Agent and the ABL Credit Parties have been paid and performed in full, all amounts as may become due from time to time from the Processor to the [Borrower/Loan Party] (including, without limitation, Credit Card Proceeds, payments from any reserve account or the like, and all other amounts due or to become due from the Processor to the [Borrower/Loan Party]) shall [continue to] be transferred only as follows:
1.01. By ACH, Depository Transfer Check, or Electronic Depository Transfer to:
Bank Name: JPMorgan Chase Bank, N.A.
ABA: 021000021
Account Name: Asset Based Operations
Account No.: 400-999773
Re: The Container Store, Inc.
or
1.02. As the Processor may be otherwise instructed from time to time in writing by an officer of the ABL Collateral Agent.
After such time as the Processor receives written notification from the ABL Collateral Agent that the obligations of the [Borrower/Loan Party] to the ABL Collateral Agent and the ABL Credit Parties have been paid and performed in full, all amounts as may become due from time to time from the Processor to the [Borrower/Loan Party] shall be transferred as the Processor may be instructed from time to time in writing by an officer of the Term Loan Collateral Agent.
Upon the request of the ABL Collateral Agent or the Term Loan Collateral Agent, a copy of each periodic statement provided by the Processor to the [Borrower/Loan Party] shall be provided to the ABL Collateral Agent or the Term Loan Collateral Agent, as applicable, at the following address (which address may be changed upon seven (7) days written notice given to the Processor by the ABL Collateral Agent or the Term Loan Collateral Agent, as applicable):
If to ABL Collateral Agent:
JPMorgan Chase Bank, N.A.
Chase Business Credit
10 South Dearborn Street
22nd Floor
Mail Code IL1-190
Chicago, Illinois 60603
Attention: Olga Prado
Telecopy: (312) 377-1091
With a copy to:
JPMorgan Chase Bank, N.A.
Chase Business Credit
2200 Ross Avenue, Floor 9 TX1-2921
Dallas, TX 75201
Attention: Andrew Ray
Facsimile: (214) 965-2594
If to Term Loan Collateral Agent:
JPMorgan Chase Bank, N.A.
1111 Fannin Street, 10th Floor
Houston, TX 77002
Attention: Darren Cunningham
Telecopier Number: (312) 385-7080
Telephone Number: (888) 292-9533
Email Address: darren.cunningham@jpmchase.com
The Processor shall be fully protected in acting on any order or direction by the ABL Collateral Agent or the Term Loan Collateral Agent given in accordance with the terms of this Credit Card Notification respecting the Credit Card Proceeds without making any inquiry whatsoever as to the ABL Collateral Agents or the Term Loan Collateral Agents right or authority to give such order or direction or as to the application of any payment made pursuant thereto.
This Credit Card Notification may be amended only by the written agreement of the Processor, the [Borrower/Loan Party], the ABL Collateral Agent and the Term Loan Collateral Agent and may be terminated solely by written notice signed by an officer of the ABL Collateral Agent and an officer of the Term Loan Collateral Agent. The [Borrower/Loan Party] shall not have any right to terminate this Credit Card Notification or, except as provided in this Credit Card Notification, amend it.
THIS CREDIT CARD NOTIFICATION SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
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Very truly yours, | |
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[THE CONTAINER STORE, INC.] | |
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By: |
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Name: |
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Title: |
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cc: JPMorgan Chase Bank, N.A., as ABL Collateral Agent
JPMorgan Chase Bank, N.A., as Term Loan Collateral Agent
EXHIBIT K
FORM OF BLOCKED ACCOUNT CONTROL AGREEMENT
Blocked Account Agreement (Agreement)
Dated as of [ ], 20[ ]
among
THE CONTAINER STORE, INC. (Customer),
JPMORGAN CHASE BANK, N.A.
in its capacity as Collateral Agent
pursuant to the ABL Security Agreement referred to below, (ABL Secured Party),
JPMORGAN CHASE BANK, N.A.
in its capacity as Collateral Agent
pursuant to the Term Security Agreement referred to below,
(Term Secured Party and, together with the ABL Secured Party, the Secured Parties),
and
(Bank)
The Customer maintains demand deposit accounts set forth on Schedule 1 hereto at Bank (collectively, the Account) into which Account cash, checks, money orders and other items of value of the Customer now or hereafter may be paid, deposited, credited, held (whether for collection, provisionally or otherwise) or otherwise in the possession or under the control of, or in transit to, Bank or any agent, bailee or custodian thereof (collectively, the Items).
1. Security Interest; Agency. The Customer is a party to (i) a security agreement (ABL Security Agreement) among the Customer and the ABL Secured Party for itself and for the benefit of certain other parties (ABL Lenders), by which the Customer has granted to the ABL Secured Party and, if applicable, the ABL Lenders, a security interest in (a) the Account, (b) all contract rights, claims and privileges in respect of the Account, and (c) all Items, and all proceeds of the foregoing; and (ii) a security agreement (Term Security Agreement) among the Customer and the Term Secured Party for itself and for the benefit of certain other parties (Term Lenders), by which the Customer has granted to the Term Secured Party and, if applicable, the Term Lenders, a security interest in (a) the Account, (b) all contract rights, claims and privileges in respect of the Account, and (c) all Items, and all proceeds of the foregoing.
2. Account.
(a) Bank represents and warrants to the Secured Parties that the Customer maintains the Account with Bank. As of the date of this Agreement, Bank does not know of any claim to or interest in the Account or any occurrence or existence of a default affecting the Account. Bank has not agreed and will not agree with any third party to comply with orders relating to the Account. The parties hereto agree that the Account is a deposit account as
defined in Section 9-102 of the New York Uniform Commercial Code. Bank also represents that it is an organization engaged in the business of banking and is therefore a bank within the meaning of Section 9-102 of the New York Uniform Commercial Code and that its jurisdiction (as determined by the rules set forth in Section 9-304(b) of the applicable Uniform Commercial Code) is New York.
(b) During the Activation Period (as hereinafter defined), the Customer hereby authorizes and directs Bank, and Bank hereby accepts such authorization and direction to comply with the instructions of the Secured Parties (without further consent of the Customer) with respect to the Account and the Items.
(c) Both the Customer and the Bank agree that, after Bank has received a notice substantially in the form set forth in Annex A hereto (a Notice), and until such time as the Secured Parties advise Bank to the contrary in writing (the Activation Period):
(i) the Secured Parties shall have the exclusive right to direct and provide instructions to Bank as to the disposition of all amounts then or thereafter deposited in the Account, Bank shall comply with all of Secured Parties instructions, and Bank shall not comply with any instruction from the Customer in connection with the Account unless consented to in writing by the Secured Parties;
(ii) the Customer shall have no rights with respect to the withdrawal or disbursement of funds in the Account and the Customer agrees it shall not make any attempt to access the Account or funds therein; and
(iii) Bank will wire transfer on each banking day all immediately available funds on deposit in the Account to the account designated below or to such other account as may be designated in writing from time to time by Secured Parties:
Bank Name: JPMorgan Chase Bank, N.A.
ABA: 021000021
Account Name: Asset Based Operations
Account No.: 400-999773
Re: The Container Store, Inc.
(d) When an Activation Period is not in effect, Customer may operate and transact business through the Account in its normal fashion, including making withdrawals from the Account, but covenants to each of the Secured Parties it will not close the Account except in accordance with Section 12.
(e) Customer and Secured Parties acknowledge and agree that the Account is linked to, and funds, payroll, employee benefit and disbursement accounts not covered by this Agreement. Customer and Secured Parties further acknowledge and agree that the payroll, employee benefit and disbursement accounts will be delinked from the Account upon Banks receipt of the Notice.
3. Reliance Upon Instructions. The Customer and the Secured Parties, as the case may be, are responsible for, and Bank may rely upon, the contents of any notice or instructions that Bank believes in good faith to be from the Secured Parties without any independent investigation. Bank shall have no duty to inquire into the authority of the person in giving such notice or instruction.
4. Statements and Other Information; Notice of Adverse Claims. Bank will, upon the Customers or the Secured Parties request, provide to the Customer and the Secured Parties information regarding the Account. In addition, Bank shall simultaneously provide the Customer and the Secured Parties with copies of all statements, notices and all other communications provided by Bank to the Customer in connection with the Account. Except as otherwise required by law, Bank shall promptly notify the Secured Parties and the Customer if Bank receives a notice from any third party claiming any type of interest in the Account.
5. Returned Items and Charges. Bank agrees not to exercise or claim any right of offset, right of recoupment, security interest, bankers lien or other like right against the Account for so long as this Agreement is in effect, except with respect to (i) returned or charged-back items, (ii) reversals or cancellations of payment orders and other electronic fund transfers, (iii) overdrafts resulting from adjustments or corrections of previous credits or other postings (together with clauses (i) and (ii), collectively, the Returned Items) or (iv) Banks charges and fees applicable to all services related to the Account as specified in writing or as otherwise agreed by the Customer and Bank (the Charges). Subject to the terms of this Agreement, Bank agrees that the security interest is superior to any right of set-off, security interest or other lien which Bank might otherwise have in the Items or the Account.
6. Limitation of Liability. Bank will not be liable to the Secured Parties or the Customer for claims, losses, liabilities or damages suffered or incurred by the Secured Parties or the Customer as a result of or in connection with this Agreement except to the extent such losses, liabilities and damages result from Banks gross negligence or willful misconduct. Bank shall not be liable for any special, indirect or consequential damages.
7. Indemnification. The Customer hereby agrees to indemnify, defend and save harmless Bank against any loss, liability or expense (including reasonable fees and disbursements of counsel who may be an employee of Bank) incurred in connection with this Agreement or the Account (except to the extent due to Banks gross negligence or willful misconduct) or incurred at the Customers direction or instruction, including without limitation any Returned Items or Charges.
8. Failure to Perform. None of the Customer, Secured Parties or Bank will be liable for any failure to perform its obligations when the failure arises out of causes beyond its control, including, without limitation, an act of a governmental or regulatory authority, an act of God, accident, equipment failure, labor disputes or system failure, provided it has exercised such diligence as the circumstances require.
9. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES). THE CUSTOMER, BANK AND THE SECURED PARTIES HEREBY WAIVER THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY.
10. Amendments and Waivers. This Agreement may be amended or waived only in writing signed by the Customer, the Secured Parties and Bank.
11. Assignment. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns, but neither the Customer nor Bank shall be entitled to assign or delegate any of its rights or duties hereunder without first obtaining the express prior written consent of the Secured Parties.
12. Termination. This Agreement may be terminated by the Customer only upon delivery to Bank of a written notification thereof jointly executed by the Customer and the Secured Parties. This Agreement may be terminated by the Secured Parties at any time, with or without cause, following its delivery of written notice thereof to each of the Customer and Bank. This Agreement may be terminated by Bank at any time on not less than thirty days prior written notice delivered to each of the Customer and the Secured Parties. Upon delivery or receipt of such notice of termination to or by Bank, Bank will, whether or not a Notice has been delivered, (a) immediately transmit to such account as the Secured Parties may direct (i) all available funds, if any, then on deposit in, or otherwise to the credit of, the Account and (ii) all available funds received by Bank after such notice for deposit in the Account and (b) deliver to the Secured Parties any checks, money orders or other Items which do not constitute available funds, without depositing such Items in the Account or any other depository account. The provisions of Sections 1 and 2 and any cause of action of the Secured Parties against any other party arising out of this Agreement shall survive termination of this Agreement unless and until specifically released by the Secured Parties in writing. All rights of Bank under Sections 5, 7 and 8 shall survive any termination of this Agreement. The provisions of this Agreement will remain in full force and effect in the event of the Customers insolvency, reorganization, or any case or proceeding under any bankruptcy or insolvency law relating to the relief of debtors.
13. Effectiveness. This Agreement shall take effect on the date set forth above and shall supercede any blocked account or similar agreement in effect with respect to the Account.
14. Entire Agreement. This Agreement constitutes the entire agreement and understanding, and supersedes all prior agreements and understandings, between the Customer, the Secured Parties and Bank relating to the services provided pursuant to this Agreement as of the date of this Agreement.
15. No Extension of Credit. Nothing in this Agreement, unless otherwise agreed to in writing between the Customer, the Secured Parties or Bank, commits or obligates Bank to
extend any overdraft or other credit to the Customer or the Secured Parties, but Bank, in its sole discretion, may do so.
16. Notices. Any notices given pursuant to this Agreement shall be in writing and all notices shall be effective when received. Each written notice shall be addressed to the relevant address appearing below or at another address specified in a written notice by one party to the other.
If to Customer:
The Container Store, Inc.
500 Freeport Parkway
Coppell, TX 75019
Attention: Natalie Levy
Telecopier Number: (972) 538-7821
Telephone Number: (972) 538-6821
Email Address: NatalieL@containerstore.com
Attention: Jeff Longmire
Telecopier Number: (972) 538-7855
Telephone Number: (972) 538-6855
Email Address: jdlongmire@containerstore.com
Attention: Michael Lambeth
Telecopier Number: (972) 538-7858
Telephone Number: (972) 538-6858
Email Address: mlambeth@containerstore.com
If to the ABL Secured Party:
JPMorgan Chase Bank, N.A.
Chase Business Credit
10 South Dearborn Street
22nd Floor
Mail Code IL1-190
Chicago, Illinois 60603
Attention: Olga Prado
Telecopy: (312) 377-1091
With a copy to:
JPMorgan Chase Bank, N.A.
Chase Business Credit
2200 Ross Avenue, Floor 9 TX1-2921
Dallas, TX 75201
Attention: Andrew Ray
Facsimile: (214) 965-2594
If to the Term Secured Party:
JPMorgan Chase Bank, N.A.
1111 Fannin Street, 10th Floor
Houston, TX 77002
Attention: Darren Cunningham
Telecopier Number: (312) 385-7080
Telephone Number: (888) 292-9533
Email Address: darren.cunningham@jpmchase.com
If to Bank:
17. Counterparts. This Agreement may be executed by the Secured Parties, the Customer and Bank individually or in several separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.
[Signature Pages to Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers or representatives as of the date first set forth above.
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[ ], as Bank | |
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By: |
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Title: |
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THE CONTAINER STORE, INC., as Customer | |
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By: |
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Title: |
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JPMORGAN CHASE BANK, N.A., as ABL Secured Party | |
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By: |
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Name: |
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Title: |
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JPMORGAN CHASE BANK, N.A., as Term Secured Party | |
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By: |
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ANNEX A
FORM OF NOTICE
JPMORGAN CHASE BANK, N.A.
, 20
[Name of Third Party Bank]
Attention:
Re: The Container Store (the Customer)
Ladies and Gentlemen:
We are hereby providing you with the Notice referred to in Section 2(c) of that certain Blocked Account Agreement (the Agreement) among the Customer, JPMorgan Chase Bank, N.A. (the ABL Secured Party), JPMorgan Chase Bank, N.A. (the Term Secured Party) and you, as depository bank. Consequently, instructions with respect to the withdrawal, transfer or payment of funds from account number [ ] (the Account) maintained with you, may be accepted and honored by you only from the Secured Party. Customer shall no longer have the right to give any instructions to you, and you shall no longer accept or be entitled to honor any such instructions you may receive from the Customer. In addition you must also forward all amounts in the Account to the Secured Parties daily in accordance with Section 2(c)(iii) of the Agreement.
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Very truly yours, | |
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JPMORGAN CHASE BANK, N.A. | |
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By: |
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Name: |
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Title: |
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LESSORS AGREEMENT
STATE OF TEXAS |
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LOCATION OF PROPERTY: |
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500 Freeport Parkway |
COUNTY OF DALLAS |
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Coppell, TX 75019 |
THIS LESSORS AGREEMENT (the Agreement) is made and entered into as of April 6, 2012 by and among DUKE SECURED FINANCING 2009 1ALZ, LLC, as successor-in-interest to Duke Realty Limited Partnership, having an office at 14241 North Dallas Parkway, Suite 1000, Dallas, Texas 75254 (Lessor) and (i) JPMORGAN CHASE BANK, N.A., having an office at 1111 Fannin Street, 10th Floor, Houston, TX 77002, as Term Loan Collateral Agent (as hereinafter defined) for the benefit of the Term Loan Credit Parties (as hereinafter defined) under the Term Loan Credit Agreement (as hereinafter defined) and (ii) JPMORGAN CHASE BANK, N.A., having an office at 10 South Dearborn Street, 22nd Floor, Mail Code IL1-1190, Chicago, Illinois 60603, as ABL Collateral Agent (as hereinafter defined) for the benefit of the ABL Credit Parties (as hereinafter defined) (the Term Loan Credit Parties and the ABL Credit Parties, collectively, the Credit Parties) under the ABL Credit Agreement (as hereinafter defined) (the Term Loan Credit Agreement and the ABL Credit Agreement, collectively, the Credit Agreement). As used herein, ABL Credit Parties shall have the meaning given the term Credit Parties in the ABL Credit Agreement and Term Loan Credit Parties shall have the meaning given the term Credit Parties in the Term Loan Credit Agreement.
RECITALS:
1. THE CONTAINER STORE, INC. (herein called Lessee), JPMORGAN CHASE BANK, N.A., as administrative agent and collateral agent (the Term Loan Collateral Agent), the lenders party thereto, the guarantors party thereto, and the other agents party thereto, are, in connection with the execution and delivery of this Agreement, entering into a credit agreement, dated as of April 6, 2012, (as amended, amended and restated, supplemented or otherwise modified from time to time, the Term Loan Credit Agreement), pursuant to which the Lenders (as defined in the Term Loan Credit Agreement) have agreed to make certain term loans to Lessee (collectively, the Term Loans).
2. Lessee, JPMORGAN CHASE BANK, N.A., as administrative agent and collateral agent (the ABL Collateral Agent), the lenders party thereto, the guarantors party thereto, and the other agents party thereto, among others, are, in connection with the execution and delivery of this Agreement, entering into a credit agreement, dated as of April 6, 2012, (as amended, amended and restated, supplemented or otherwise modified from time to time, the ABL Credit Agreement), pursuant to which the Lenders (as defined in the ABL Credit Agreement) have agreed to make certain revolving loans to Lessee (collectively, the Revolving Loans, and with the Term Loans, collectively, the Loans).
3. As security for the payment and performance of Lessees (i) Obligations under and as defined in the Term Loan Credit Agreement and the other Loan Documents (as defined in the Term Loan Credit Agreement) and (ii) Obligations under and as defined in the ABL Credit
Agreement and the other Loan Documents (as defined in the ABL Credit Agreement), respectively, the ABL Collateral Agent (for its benefit and the benefit of the ABL Credit Parties) and the Term Loan Collateral Agent (for its benefit and the benefit of the Term Loan Credit Parties) has or will acquire a security interest in and lien upon all of the Lessees personal property, inventory, accounts, goods, machinery, equipment, furniture and fixtures (together with all additions, substitutions, replacements and improvements to, and proceeds of, the foregoing, collectively, the Collateral).
4. The ABL Collateral Agent has requested that Lessor execute this Agreement in connection with the making of the Loans under the Credit Agreement.
5. As used herein, Collateral Agent means the Term Loan Collateral Agent and the ABL Collateral Agent, collectively; provided that (except where this Agreement refers to Collateral Agents, each Collateral Agent, either Collateral Agent, the applicable Collateral Agent, neither Collateral Agent or the Term Loan Collateral Agent or the ABL Collateral Agent, individually) prior to the Discharge of ABL Obligations (as defined in the Term Loan Credit Agreement), each reference herein to Collateral Agent shall be deemed to be a reference to the ABL Collateral Agent, and after the Discharge of ABL Obligations, each such reference shall be deemed to be a reference to the Term Loan Collateral Agent.
In consideration of the covenants contained herein, the promises and agreement contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lessor, Lessee, the ABL Collateral Agent and the Term Loan Collateral Agent hereby agree as follows:
1. That as of this date, to Lessors actual knowledge, Lessee is not in default under any terms of that certain Industrial Lease Agreement between Lessor and Lessee dated as of October 8, 2002 (as amended from time to time, the Lease), pursuant to which Lessee leases from Lessor that certain premises known as 500 Freeport Parkway, Suite 100, Coppell, Texas 75019-3863, as more particularly described in the Lease (the Premises).
2. That in the event of any default under the Lease, Lessor will use good faith efforts to notify Collateral Agent, at the address set forth hereinbelow, of the earlier to occur of (a) Lessor giving or delivering any notice to Lessee in connection with such default, or (b) Lessors termination of the Lease and/or demand for possession of the Premises.
3. Lessor hereby subordinates its lien in the Collateral to the security interest of the ABL Collateral Agent and the Term Loan Collateral Agent in the Collateral and acknowledges that Lessors lien in the Collateral will be subordinate to the lien of the ABL Collateral Agent and the Term Loan Collateral Agent for so long as either the ABL Collateral Agent or the Term Loan Collateral Agent has a security interest in the Collateral and this Lessors Agreement is in effect; provided, however, that this subordination shall not be deemed to impair Lessors rights to (a) bid for and purchase any of the Collateral at a public or private sale; (b) any surplus monies arising out of a sale of the Collateral if the Loan is paid in full from the proceeds of the sale or other disposition of the Collateral or otherwise; or (c) file proofs of claim or otherwise participate in insolvency or bankruptcy proceedings involving Lessee or the Collateral.
4. Notwithstanding anything to the contrary contained herein, in the event that Lessor notifies Collateral Agent in writing that (a) the lease has been terminated prior to its stated expiration date, or (b) Lessor has taken possession of the Premises as a result of Lessees default under the Lease, Collateral Agent shall have thirty (30) days (i) after receiving said notice and (ii) being given access to the Premises, to remove the Collateral from the Premises or notify Lessor that Collateral Agent elects to abandon the Collateral. If Collateral Agent fails to remove the Collateral or Collateral Agent has not provided Lessor with notice that Collateral Agent elects to abandon the Collateral within said thirty (30) day period, Lessor may, at its option, charge Collateral Agent commercially reasonable rent for the Premises during the period that the Collateral is left in the Premises, or Lessor shall have the right to remove and store the Collateral at Collateral Agents expense and to have a security interest in the Collateral for such expense; provided, however, such removal and storage shall not exceed 30 days after which time the Collateral Agent shall be deemed to have abandoned the Collateral and shall no longer be liable for rent and storage. If any state or federal law or any order of a court (including, but not limited to, the automatic stay under any federal bankruptcy laws) prohibits or restricts Collateral Agent from removing any of the Collateral, then any such 30-day period shall be extended until 30 days after Collateral Agent is notified in writing that such law or court order is no longer in effect for such Collateral. If Collateral Agent, in removing the Collateral, damages any improvements of Lessor, Collateral Agent will immediately reimburse Lessor for the reasonable out of pocket costs of repairing said damage. Collateral Agent shall remove all Collateral in accordance with all reasonable rules and regulations applicable to the building in which the Premises are located.
5. Collateral Agent hereby indemnifies and holds harmless Lessor from and against any loss, cost, damages, claims and expenses, including, without limitation, reasonable attorneys fees and court costs, suffered by Lessor and resulting from Collateral Agents negligent acts or willful misconduct on the Premises or on other property owned by Lessor. Collateral Agent hereby waives any claim or cause of action against Lessor for injury or damage to person or property or any other claim whatsoever, other than resulting from Lessors negligence or willful misconduct, in connection with or arising out of Collateral Agents re-entry upon the Premises and/or its removal of the Collateral therefrom.
6. Lessor represents that it has full power and authority to execute this instrument and has title to the Premises or such property rights therein as to make effective the lease of the Premises to Lessee. Lessee and Collateral Agent each represents that it has full power to execute this instrument. Lessee consents to any and all actions taken by Collateral Agent or Lessor pursuant to this instrument.
7. All notices delivered by Lessor to ABL Collateral Agent or the Term Loan Collateral Agent hereunder shall be delivered by certified mail, return receipt requested at the address for each respective Collateral Agent set forth in the introductory paragraph hereto.
8. Lessor acknowledges and agrees that Lessees granting of a security interest in the Collateral in favor of the Collateral Agent (for its benefit and the benefit of the Credit Parties) shall not constitute a default under the Lease nor permit Lessor to terminate the Lease or re-enter or repossess the Premises or otherwise be the basis for the exercise of any remedy by Lessor and Lessor hereby expressly consents to the granting of such security interest.
9. Lessor acknowledges and agrees that if Lessee defaults under the Credit Agreement and Collateral Agent exercises its right to assume Lessees obligations under the Lease that Lessor shall consent to an assignment and assumption of the Lease to Collateral Agent.
10. Lessor acknowledges and agrees that if Lessee defaults under the Lease and Collateral Agent exercises its right within fifteen days after written notice from the Lessor of an uncured default by the Lessee (i) to cure such default and (ii) assume Lessees obligations under the Lease that Lessor shall consent to an assignment and assumption of the Lease to Collateral Agent.
11. 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. Delivery of an executed counterpart of a signature page of this Agreement by electronic mail or telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.
[Signature Pages to Follow]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written.
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DUKE SECURED FINANCING 2009 1ALZ, LLC | |
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SIGNATURE PAGE
LESSORS AGREEMENT- THE CONTAINER STORE, INC.
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THE CONTAINER STORE, INC. | |
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Jodi Taylor |
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SIGNATURE PAGE
LESSORS AGREEMENT- THE CONTAINER STORE, INC.
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JPMORGAN CHASE BANK, N.A., | |
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as ABL Collateral Agent | |
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Andrew Ray |
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SIGNATURE PAGE
LESSORS AGREEMENT- THE CONTAINER STORE, INC.
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JPMORGAN CHASE BANK, N.A., | |
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SIGNATURE PAGE
LESSORS AGREEMENT- THE CONTAINER STORE, INC.
EXHIBIT M-1
[Form of] U.S. Tax Certificate
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among, among others, THE CONTAINER STORE, INC., a Texas corporation (Borrower), the Guarantors party thereto (each individually, a Guarantor and, collectively, the Guarantors), each lender from time to time party thereto (collectively, the Lenders and individually, a Lender), and JPMORGAN CHASE BANK, N.A. as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties.
Pursuant to the provisions of Section 3.01(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code and (v) the interest payments in question are not effectively connected with the undersigneds conduct of a U.S. trade or business.
The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-United States person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF LENDER]
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Date: , 20[ ]
EXHIBIT M-2
[Form of] U.S. Tax Certificate
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among, among others, THE CONTAINER STORE, INC., a Texas corporation (Borrower), the Guarantors party thereto (each individually, a Guarantor and, collectively, the Guarantors), each lender from time to time party thereto (collectively, the Lenders and individually, a Lender), and JPMORGAN CHASE BANK, N.A. as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties.
Pursuant to the provisions of Section 3.01(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect applicable partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the extension of credit pursuant to this Credit Agreement, neither the undersigned nor any of its direct or indirect applicable partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect applicable partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871 (h)(3)(B) of the Code, (v) none of its direct or indirect applicable partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are not effectively connected with the undersigneds or its direct or indirect applicable partners/members conduct of a U.S. trade or business.
The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent and (2) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF LENDER]
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EXHIBIT M-3
[Form of] U.S. Tax Certificate
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among, among others, THE CONTAINER STORE, INC., a Texas corporation (Borrower), the Guarantors party thereto (each individually, a Guarantor and, collectively, the Guarantors), each lender from time to time party thereto (collectively, the Lenders and individually, a Lender), and JPMORGAN CHASE BANK, N.A. as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties.
Pursuant to the provisions of Section 3.01(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (v) the interest payments in question are not effectively connected with the undersigneds conduct of a U.S. trade or business.
The undersigned has furnished its participating Lender with a certificate of its non-United States person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
[NAME OF PARTICIPANT]
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Date: , 20[ ]
EXHIBIT M-4
[Form of] U.S. Tax Certificate
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement) by and among, among others, THE CONTAINER STORE, INC., a Texas corporation (Borrower), the Guarantors party thereto (each individually, a Guarantor and, collectively, the Guarantors), each lender from time to time party thereto (collectively, the Lenders and individually, a Lender), and JPMORGAN CHASE BANK, N.A. as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties.
Pursuant to the provisions of Section 3.01(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect applicable partners/members are the sole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect applicable partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect applicable partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, (v) none of its direct or indirect applicable partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code, and (vi) the interest payments in question are not effectively connected with the undersigneds or its direct or indirect applicable partners/members conduct of a U.S. trade or business.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partners/members beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.
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Date: , 20[ ]
Exhibit 10.13
AMENDMENT No. 1, dated as of April 8, 2013 (this Amendment), to the Credit Agreement dated as of April 6, 2012, among THE CONTAINER STORE, INC., a Texas corporation (the Borrower), the Guarantors party thereto, the several banks and other financial institutions or entities from time to time parties to the Credit Agreement (the Lenders), JPMORGAN CHASE BANK, N.A., as Administrative Agent (the Administrative Agent) and Collateral Agent, and the other parties thereto (as amended, restated, modified and supplemented from time to time, the Credit Agreement); capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement, as amended hereby.
WHEREAS, the Borrower desires to amend the Credit Agreement to, among other things, permit the Borrower to incur additional Indebtedness under the Term Facility and to pay the Special Distribution, in each case, on the terms set forth herein; and
WHEREAS, Section 11.01 of the Credit Agreement provides that the relevant Loan Parties and the Required Lenders may amend the Credit Agreement and the other Loan Documents for certain purposes;
NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1. Amendments. The Credit Agreement is, effective as of the Amendment No. 1 Effective Date (as defined below), hereby amended as follows:
(a) Additional Definitions. Section 1.01 of the Credit Agreement is hereby amended to add thereto in alphabetical order the following definitions which shall read in full as follows:
Amendment No. 1 means Amendment No. 1 to this Agreement, dated as of April 8, 2013, by and among the Borrower, the Guarantors, the Administrative Agent, the Collateral Agent and the Lenders party thereto.
Amendment No. 1 Effective Date has the meaning specified in Amendment No. 1.
Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
Excluded Swap Obligation means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan
Partys failure for any reason to constitute an eligible contract participant as defined in the Commodity Exchange Act and the regulations thereunder at the time such Loan Partys obligations under the last paragraph of Section 10.01 become effective with respect to such related Swap Obligation.
Qualified ECP Guarantor means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an eligible contract participant under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an eligible contract participant at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Special Distribution means payments in respect of: (i) the payment by the Borrower to Holdings, the proceeds of which will be used to redeem a portion of the Equity Interests of Holdings and/or to pay cash dividends or distributions to the holders of the Equity Interests of Holdings and/or (ii) special bonuses, dividend equivalents or other payments payable to officers, employees, consultants and directors who hold options or similar Equity Interests in Holdings; provided that (a) the aggregate amount of such payments does not exceed $90,000,000 and (b) such payments are made on or prior to the date that is thirty (30) calendar days after the Amendment No. 1 Effective Date.
Swap Obligation means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a swap within the meaning of section 1a(47) of the Commodity Exchange Act.
(b) Amended Definitions. The following definitions contained in Section 1.01 of the Credit Agreement are hereby amended and restated in their entirety to read in full as follows:
FATCA means Sections 1471 through 1474 of the Code as in effect on the date hereof (including, for the avoidance of doubt, any agreements between governmental authorities implementing such provisions) or any successor provision that is substantively comparable and not materially more onerous to comply with, and, in each case, any current or future regulations promulgated thereunder or official interpretations thereof.
Lender has the meaning specified in the introductory paragraph hereto and their respective successors and assigns as permitted hereunder,
each of which is referred to herein as a Lender; as the context requires, the term Lender includes the Swing Line Lender.
Obligations means (a) all debts (including principal, interest, fees, costs, and expenses), liabilities, obligations, covenants, indemnities, and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit (including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral therefor), whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, and (b) any Other Liabilities, excluding, with respect to any Guarantor that is not an eligible contract participant under the Commodity Exchange Act and the regulations promulgated thereunder, Excluded Swap Obligations of such Guarantor.
(c) Amendment to Section 7.02(d) of the Credit Agreement. Clause (d) of Section 7.02 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
(d) Indebtedness of the Loan Parties under the Term Facility and any Permitted Refinancing Indebtedness in respect thereof (including Guarantees of any Guarantor in respect of such Indebtedness) not to exceed the sum of (i) $362,250,000 and (ii) provided that the Consolidated Leverage Ratio, on a Pro Forma Basis, for the Measurement Period most recently ended prior to the date of effectiveness of the incurrence of any incremental Indebtedness under the Term Facility is no greater than 4.00 to 1.00, up to an additional $50.0 million.
(d) Amendment to Section 7.02(j) of the Credit Agreement. Clause (j) of Section 7.02 of the Credit Agreement is hereby amended and restated in its entirety to read in full as follows:
(j) (i) unsecured Indebtedness of any Loan Party with no scheduled payments of principal until the date that is 6 months after the Latest Maturity Date; provided that (A) on a Pro Forma Basis, the Consolidated Leverage Ratio (calculated to exclude the net cash proceeds from Indebtedness incurred pursuant to this Section 7.02(j)) for the Measurement Period most recently ended prior to the incurrence of such Indebtedness is no greater than 4.50 to 1.00 and (B) no Event of Default shall have occurred and be continuing at the time of and immediately after the incurrence
of such Indebtedness and (ii) Permitted Refinancing Indebtedness in respect of Indebtedness permitted by subclause (i) above;
(e) Amendment to Section 7.06 of the Credit Agreement. Section 7.06 of the Credit Agreement is hereby amended by (i) deleting the reference to and at the end of clause (i) thereof, (ii) inserting and at the end of clause (j) thereof, and (iii) adding a new clause (k) to such Section immediately following clause (j) thereof, which shall read in full as follows:
(k) the Special Distribution;
(f) Amendment to Section 8.03 of the Credit Agreement. Section 8.03 of the Credit Agreement is hereby amended by inserting the following at the end of the last paragraph thereof, which shall read in full as follows:
Notwithstanding the foregoing, amounts received from the Borrower or any Guarantor that is not a an eligible contract participant under the Commodity Exchange Act and the regulations promulgated thereunder shall not be applied to the Obligations that are Excluded Swap Obligations (it being understood, that in the event that any amount is applied to Obligations other than Excluded Swap Obligations as a result of this sentence, the Administrative Agent shall, to the extent permitted by law, make such adjustments as it determines are appropriate to distributions pursuant to clause Ninth above from amounts received from eligible contract participants under the Commodity Exchange Act and the regulations promulgated thereunder to ensure, as nearly as possible, that the proportional aggregate recoveries with respect to Obligations described in clause Ninth above by the holders of any Excluded Swap Obligations are the same as the proportional aggregate recoveries with respect to other Obligations pursuant to clause Ninth above).
(g) Amendment to Section 10.01 of the Credit Agreement. Section 10.01 of the Credit Agreement is hereby amended by inserting the following paragraph immediately following the end of the last paragraph thereof, which shall read in full as follows:
Each Qualified ECP Guarantor (including the Borrower) hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of each such Loan Partys obligations (a) in respect of Swap Contracts to which it is a party and (b) under this Guaranty in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 10.01 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 10.01, or otherwise under this Guaranty, as it relates to such other Loan Party, voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the termination of this Guaranty in accordance with Section 10.06 hereof. Each Qualified ECP Guarantor intends that this Section 10.01 constitute, and this Section 10.01 shall be deemed to constitute, a keepwell, support, or other agreement for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
Section 2. Intercreditor Agreement Amendment. Each Lender hereto consents to the Administrative Agent and Collateral Agent effecting an amendment to the Intercreditor Agreement in the form of Exhibit A hereto.
Section 3. Representations and Warranties, No Default. In order to induce the Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, each of the Loan Parties represents and warrants to each Lender that:
(a) After giving effect to this Amendment, each of the representations and warranties in the Credit Agreement and in the other Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date; and
(b) At the time of and immediately after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing.
Section 4. Effectiveness. Section 1 of this Amendment shall become effective on the date (such date, if any, the Amendment No. 1 Effective Date) that the following conditions have been satisfied:
(i) Consents. The Administrative Agent shall have received executed signature pages hereto from Lenders constituting the Required Lenders;
(ii) Amendment to Term Loan Credit Agreement and Intercreditor Agreement. The Administrative Agent shall have received copies of fully executed amendments to (x) the Intercreditor Agreement in the form of Exhibit A hereto and (y) the Term Loan Credit Agreement in the form of Exhibit B hereto and shall be satisfied that such amendments shall become effective on or prior to the Amendment No. 1 Effective Date.
(iii) Fees. The Borrower shall have paid, to the extent invoiced prior to the Amendment No. 1 Effective Date, all reasonable out-of-pocket expenses of the Administrative Agent in connection with this Amendment and the transaction contemplated hereby (including the reasonable fees and expenses of Vinson & Elkins L.L.P., counsel to the Administrative Agent); and
(iv) Officers Certificate. The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower dated the Amendment No. 1 Effective Date certifying that (a) after giving effect to this Amendment, each of the representations and warranties in the Credit Agreement and in the other Loan Documents are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent that any such representation or warranty expressly relates to an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date and (b) at the time of and immediately after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing.
(v) Amendment Agreement to Swedish Pledge Agreement. The Administrative Agent shall have received duly executed counterparts from each party thereto of an Amendment Agreement with respect to the Swedish Pledge Agreement in form and substance reasonably satisfactory to the Administrative Agent.
Section 5. Counterparts. This Amendment 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. Delivery of an executed counterpart of a signature page to this Amendment by telecopier or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Amendment.
Section 6. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THAT WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE OF NEW YORK.
Section 7. Headings. Section and Subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect.
Section 8. Effect of Amendment. Except as expressly set forth herein, (i) this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders, the Administrative Agent or any other Agent, in each case under the Credit Agreement or any other Loan Document, and (ii) shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of either such agreement or any other Loan Document. Each and every term, condition, obligation, covenant and agreement contained in the Credit Agreement or any other Loan Document is hereby ratified and reaffirmed in all respects and shall continue in full force and effect. Each Loan Party reaffirms its obligations under the Loan Documents to which it is party and the validity of the Liens granted by it pursuant to the Collateral Documents. This Amendment shall constitute a Loan Document
for purposes of the Credit Agreement and from and after the Amendment No. 1 Effective Date, all references to the Credit Agreement in any Loan Document and all references in the Credit Agreement to this Agreement, hereunder, hereof or words of like import referring to the Credit Agreement, shall, unless expressly provided otherwise, refer to the Credit Agreement as amended by this Amendment. Each of the Loan Parties hereby (i) consents to this Amendment, (ii) confirms that all obligations of such Loan Party under the Loan Documents to which such Loan Party is a party shall continue to apply to the Credit Agreement as amended hereby and (iii) agrees that all security interests granted by it pursuant to any Loan Document shall secure the Credit Agreement as amended by this Amendment.
Section 9. Submission To Jurisdiction; Waivers. Each of the parties hereto hereby irrevocably and unconditionally agrees that Section 11.14 of the Credit Agreement is incorporated herein mutatis mutandis.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.
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/s/ Jodi Taylor |
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Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS HOLDINGS, INC., | |
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TCS GIFT CARD SERVICES, LLC, | |
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TCS INSTALLATION SERVICES, LLC, | |
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each as a Guarantor | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
[SIGNATURE PAGE TO AMENDMENT NO. 1 - THE CONTAINER STORE, INC.]
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JPMORGAN CHASE BANK, N.A., |
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as Administrative Agent, Collateral Agent, and | |||
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as Lender |
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By: |
/s/ Andrew Ray | ||
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Name: |
Andrew Ray |
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Title: |
Authorized Officer |
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[SIGNATURE PAGE TO AMENDMENT NO. 1 - THE CONTAINER STORE, INC.]
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WELLS FARGO BANK, NATIONAL | ||
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ASSOCIATION, as Lender | ||
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By: |
/s/ Peter Yelle | |
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Name: |
Peter Yelle |
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Title: |
Relationship Manager |
[SIGNATURE PAGE TO AMENDMENT NO. 1 - THE CONTAINER STORE, INC.]
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ACKNOWLEDGED AND AGREED: | |
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THE CONTAINER STORE, INC., as Borrower | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS HOLDINGS, INC., | |
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TCS GIFT CARD SERVICES, LLC, | |
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TCS INSTALLATION SERVICES, LLC, | |
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each as a Guarantor | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
SIGNATURE PAGE TO
AMENDMENT NO. 1 TO INTERCREDITOR AGREEMENT
THE CONTAINER STORE, INC.
EXHIBIT A
Form of Intercreditor Agreement Amendment
(See attached.)
[INTENTIONALLY OMITTED]
EXHIBIT B
Term Loan Credit Agreement Amendment
(See attached.)
[INTENTIONALLY OMITTED]
Exhibit 10.14
ABL FACILITY PLEDGE AGREEMENT
ABL FACILITY PLEDGE AGREEMENT (this Agreement), dated as of April 6, 2012, by and between (a) THE CONTAINER STORE, INC., a Texas corporation (the Borrower), (b) each subsidiary listed on Schedule II (together with the Borrower and, collectively together with any subsidiary that becomes a party hereto pursuant to Section 4.15 of the Security Agreement, in such capacities and together with any successor in such capacities, the Pledgors, and each, a Pledgor), and (c) JPMORGAN CHASE BANK, N.A., a national banking association, as collateral agent (in such capacity, the Collateral Agent) for its own benefit and the benefit of the other Credit Parties (as defined in the Credit Agreement referred to below), in consideration of the mutual covenants contained herein and benefits to be derived herefrom.
WITNESSETH:
WHEREAS, reference is made to that certain Credit Agreement (the Credit Agreement), dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement), by and among, among others, (i) the Borrower, (ii) the Guarantors (iii) JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties, (iv) the Collateral Agent for its own benefit and the benefit of the other Credit Parties and (v) the lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), among others; and
WHEREAS, the obligations of the Lenders to make Loans and of the L/C Issuers to issue Letters of Credit are each conditioned upon, among other things, the execution and delivery by the Pledgors of (i) that certain ABL Facility Security Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Security Agreement), by and between, among others, the Pledgors and the Collateral Agent, pursuant to which each Pledgor grants to the Collateral Agent (for its own benefit and the benefit of the other Credit Parties) a security interest in and to the Collateral (as defined therein), and (ii) an agreement in the form hereof, pursuant to which each Pledgor grants to the Collateral Agent (for its own benefit and the benefit of the other Credit Parties) a security interest in and to the Pledged Collateral (as defined herein), in order to secure the Secured Obligations (as defined herein).
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgors and the Collateral Agent, on its own behalf and on behalf of the other Credit Parties (and each of their respective successors or permitted assigns), hereby agrees as follows:
SECTION 1
Definitions
1.1 Generally. All references herein to the UCC shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if a term is defined in Article 9 of the UCC differently than in another Article thereof, the term shall have
the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of the security interest in any Pledged Collateral or the availability of any remedy hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, UCC means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.
1.2 Definitions of Certain Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement. In addition, as used herein, the following terms shall have the following meanings:
Administrative Agent shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Agreement shall have the meaning assigned to such term in the preamble to this Agreement.
Blue Sky Laws shall have the meaning assigned to such term in Section 7.7 of this Agreement.
Borrower shall have the meaning assigned to such term in the preamble to this Agreement.
Collateral shall have the meaning assigned to such term in the Security Agreement.
Collateral Agent shall have the meaning assigned to such term in the preamble of this Agreement.
Credit Agreement shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Financing Statement shall have the meaning assigned to such term in the Security Agreement.
Guarantor and Guarantors shall have the meaning assigned to such terms in the Credit Agreement.
Investment Property shall have the meaning assigned to such term in the Security Agreement.
Issuer shall have the meaning assigned to such term in Section 2.1 of this Agreement.
Lender and Lenders shall have the meaning assigned to such terms in the preliminary statement of this Agreement.
Permitted Disposition shall have the meaning assigned to such term in the Security Agreement.
Permitted Liens shall have the meaning assigned to such term in the Security Agreement.
Pledged Collateral shall have the meaning assigned to such term in Section 2.5 of this Agreement.
Pledged Securities shall have the meaning assigned to such term in Section 2.1 of this Agreement.
Pledgor shall have the meaning assigned to such term in the preamble of this Agreement.
Secured Obligations shall mean the Obligations (as defined in the Credit Agreement).
Securities Act shall have the meaning assigned to such term in Section 7.7 of this Agreement.
Securities Intermediary shall have the meaning assigned to such term in the UCC.
Security Agreement shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Term Loan Collateral Agent shall mean JPMorgan Chase Bank, N.A., in its capacity as Collateral Agent under the Term Facility, and its successors and permitted assigns.
Uncertificated Security shall have the meaning assigned to such term in the UCC.
Voting Equity Interests shall have the meaning assigned to such term in the Security Agreement.
1.3 Rules of Interpretation. The rules of interpretation specified in Article I of the Credit Agreement shall be applicable to this Agreement.
SECTION 2
Pledge
As security for the payment or performance, as the case may be, in full of the Secured Obligations, each Pledgor hereby grants to the Collateral Agent, its successors and permitted assigns, for its own benefit and the benefit of the other Credit Parties, a security interest in and pledge of all of the Pledgors right, title and interest in, to and under:
2.1 all shares of capital stock, limited liability company membership interests and other Equity Interests owned by each Pledgor, including in each entity designated as an Issuer on Schedule I hereto (each an Issuer), and any shares of capital stock, limited liability company membership interests or other Equity Interests obtained in the future by each Pledgor, and the stock certificates or other security certificates (as defined in the UCC) representing all
such shares, membership interests or other Equity Interests (the Pledged Securities); provided however, that the Pledged Securities shall not include, and the security interest shall not attach to: (i) equity interests in joint ventures or any non-wholly-owned Subsidiaries, but only to the extent that the organizational documents or other agreements with other equity holders do not permit or restrict the pledge of such equity interests, (ii) more than 65% of the outstanding Voting Equity Interests of any (x) CFC or (y) U.S. Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of its assets consist of the capital stock of one or more Foreign Subsidiaries and (iii) equity interests in any Unrestricted Subsidiary;
2.2 all other Investment Property that may be delivered to, and held by, the Term Loan Collateral Agent, as agent for the Collateral Agent and the other Credit Parties, among others, pursuant to the terms of the Intercreditor Agreement, or the Collateral Agent pursuant to the terms hereof;
2.3 subject to Section 6, all dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed or distributable, in respect of, or in exchange for, the Pledged Securities and other Investment Property referred to in clauses 2.1 and 2.2 above;
2.4 subject to Section 6, all rights and privileges of each Pledgor with respect to the Pledged Securities and other Investment Property referred to in clauses 2.1, 2.2, and 2.3 above; and
2.5 all proceeds of any of the foregoing (the items referred to in clauses 2.1 through 2.4 being collectively referred to as the Pledged Collateral).
TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Collateral Agent, its successors and permitted assigns, for its own benefit and the benefit of the other Credit Parties, until (i) the Commitments have expired or been terminated (ii) all of the Secured Obligations have been paid in full in cash or otherwise satisfied (other than any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement or the Credit Agreement) (iii) all L/C Obligations have been reduced to zero (or fully cash collateralized in a manner reasonably satisfactory to the applicable L/C Issuer and the Administrative Agent), and (iv) the L/C Issuers have no further obligation to issue Letters of Credit under the Credit Agreement; subject, however, to the terms, covenants and conditions hereinafter set forth.
Upon delivery to the Term Loan Collateral Agent or the Collateral Agent pursuant to Section 3 of this Agreement, (a) all stock certificates or other securities now or hereafter included in the Pledged Securities shall be accompanied by stock powers duly executed in blank or other instruments of transfer reasonably satisfactory to the Term Loan Collateral Agent and the Collateral Agent and by such other instruments and documents as the Term Loan Collateral Agent and the Collateral Agent may reasonably request, and (b) all other Investment Property comprising part of the Pledged Collateral shall be accompanied by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Term Loan Collateral Agent and the Collateral Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the Pledged Securities
theretofore and then being pledged hereunder, which schedule shall be attached hereto as Schedule I and made a part hereof. Each schedule so delivered shall supersede any prior schedules so delivered.
SECTION 3
Delivery of the Pledged Collateral
3.1 On or before the Closing Date, each Pledgor shall deliver or cause to be delivered to the Term Loan Collateral Agent (with copies to the Collateral Agent), as agent for the Collateral Agent and the other Credit Parties, among others, pursuant to the terms of the Intercreditor Agreement, any and all Pledged Securities, any and all Investment Property, and any and all original certificates or other instruments or documents representing the Pledged Collateral (in each case, other than any Investment Property that is held by or credited to the books of a Securities Intermediary); provided, however, that with respect to (i) any Uncertificated Security, (ii) any limited liability company interest that (x) is not represented by a certificate or (y) is not a Security, as defined in the UCC, and (iii) any partnership interest that (x) is not represented by a certificate or (y) is not a Security, as defined in the UCC, upon the request of the Term Loan Collateral Agent or the Collateral Agent, the Pledgors shall cause the Issuer thereof to duly authorize, execute and deliver to the Term Loan Collateral Agent and the Collateral Agent an agreement in form and substance satisfactory to the Term Loan Collateral Agent and the Collateral Agent, pursuant to which such Issuer agrees to comply with any and all instructions originated by (i) until the date upon which the Discharge of Term Obligations (as defined in the Intercreditor Agreement) shall have occurred, the Term Loan Collateral Agent and (ii) from and after the date upon which the Discharge of Term Obligations shall have occurred, the Collateral Agent, in each case without further consent by the registered owner of such Uncertificated Security, limited liability company interest or partnership interest, and not to comply with any instructions regarding such Uncertificated Security, limited liability company interest or partnership interest originated by any other Person (other than a court of competent jurisdiction).
3.2 After the Closing Date, promptly upon any Pledgors acquiring any Pledged Securities, and any original certificates or other instruments or documents representing such Pledged Securities, such Pledgor shall deliver or cause to be delivered such Pledged Collateral (i) until the date upon which the Discharge of Term Obligations shall have occurred, to the Term Loan Collateral Agent (with copies to the Collateral Agent), as agent for the Collateral Agent and the other Credit Parties, among others, pursuant to the terms of the Intercreditor Agreement, and (ii) from and after the date upon which the Discharge of Term Obligations shall have occurred, to the Collateral Agent (in each case, other than any Investment Property that is held by or credited to the books of a Securities Intermediary); provided, however, that if at any time after the Closing Date such Pledgor shall own any (i) Uncertificated Security, (ii) any limited liability company interest that (x) is not represented by a certificate or (y) is not a Security, as defined in the UCC or (iii) any partnership interest that (x) is not represented by a certificate or (y) is not a Security, as defined in the UCC, the Pledgors shall cause the issuer thereof to comply promptly with the requirements of the proviso to Section 3.1 with respect thereto.
3.3 Each of the Pledgors hereby irrevocably authorizes the Collateral Agent, at any time and from time to time, to file in any appropriate filing office, wherever located, any Financing Statement describing the Pledged Collateral that contains any information required by the UCC of the applicable jurisdiction for the sufficiency or filing office acceptance of any Financing Statement. Each Pledgor also authorizes the Collateral Agent to take any and all actions required by any applicable Law to perfect and protect the security interest granted hereunder. Each Pledgor shall provide the Collateral Agent with any information the Collateral Agent shall reasonably request in connection with any of the foregoing.
3.4 Prior to the satisfaction of the Discharge of Term Obligations, with respect to any obligation under this Agreement, any other Collateral Document, or the Credit Agreement to deliver possession or control of any Collateral on which there is a Second Priority Lien by the Collateral Agent, such obligation shall be deemed satisfied by the delivery of possession or control of such Collateral to the Term Loan Collateral Agent (holding for the benefit of the Collateral Agent for the Credit Parties).
SECTION 4
Representations, Warranties and Covenants
The Pledgors hereby jointly and severally represent, warrant and covenant, as to each Pledgor and the Pledged Collateral pledged by each Pledgor hereunder, to and with the Collateral Agent that:
4.1 Schedule I sets forth a true and correct list of all Equity Interests owned by each Pledgor and the Pledged Securities represent that percentage of the issued and outstanding shares of each class of the capital stock or other Equity Interest of the Issuer with respect thereto as set forth on Schedule I;
4.2 except for the security interest granted hereunder, and except as otherwise permitted in the Credit Agreement and the other Loan Documents, each Pledgor (i) is and will at all times continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule I, (ii) holds the Pledged Collateral free and clear of all Liens, other than Permitted Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in, or other Lien on, the Pledged Collateral, other than pursuant hereto and other than Permitted Liens, and (iv) other than as permitted in Section 6.2, will cause any and all distributions in cash or in kind made on the Pledged Collateral to be forthwith deposited with the Collateral Agent and pledged or assigned hereunder;
4.3 except in compliance with the Credit Agreement, no Pledgor will consent to or approve the issuance of (a) any additional shares of any class of capital stock of any Issuer of the Pledged Securities, or the issuance of any membership interests or other Equity Interests in any such Person, (b) any securities convertible voluntarily by the holder thereof or automatically upon the occurrence or nonoccurrence of any event or condition into, or exchangeable for, any such shares, membership interests or other Equity Interests, or (c) any warrants, options, rights, or other commitments entitling any person to purchase or otherwise acquire any such shares, membership interests or other Equity Interests;
4.4 each Pledgor (i) has the power and authority to pledge the Pledged Collateral in the manner hereby done or contemplated and (ii) will defend its title or interest thereto or therein against any and all Liens (other than Permitted Liens), however arising, of all Persons whomsoever;
4.5 except for consents or approvals already obtained, no consent of any other Person (including stockholders or creditors of the Pledgors), and no consent or approval of any Governmental Authority or any securities exchange, was or is necessary to the validity of the pledge effected hereby or to the disposition of the Pledged Collateral upon an Event of Default in accordance with the terms of this Agreement and the Security Agreement;
4.6 by virtue of the execution and delivery by each Pledgor of this Agreement, and the delivery by each Pledgor to the Collateral Agent or the Term Loan Collateral Agent, as agent for the Collateral Agent and the other Credit Parties, among others, pursuant to the terms of the Intercreditor Agreement, of the stock certificates or other certificates or documents representing or evidencing the Pledged Collateral in accordance with the terms of this Agreement, the Collateral Agent will obtain a valid and perfected Lien upon, and security interest in, the Pledged Collateral as security for the payment and performance of the Secured Obligations;
4.7 all of the Pledged Securities set forth on Schedule I have been duly authorized and validly issued and, to the extent applicable, are fully paid and nonassessable; and
4.8 all information set forth herein relating to the Pledged Collateral is accurate and complete in all material respects as of the date hereof.
SECTION 5
Registration in Nominee Name; Copies of Notices
Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent, on its own behalf and on behalf of the other Credit Parties, shall have the right (in its reasonable discretion) to hold the Pledged Securities in its own name as pledgee, the name of its nominee (as pledgee or as sub-agent) or the name of each Pledgor, endorsed or assigned in blank or in favor of the Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in its name.
SECTION 6
Voting Rights; Dividends and Interest, Etc.
6.1 Unless and until the Pledgors receive notice that an Event of Default has occurred and is continuing, the Pledgors shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of the Pledged Securities or any part thereof to the extent, and only to the extent, that such rights are exercised for any purpose consistent with, and not otherwise in violation of, the terms and conditions of this Agreement, the Credit Agreement, the other Loan Documents and applicable Law; provided, however, that no Pledgor will be entitled to exercise any such right if the result thereof could reasonably be expected to
materially and adversely affect the rights and remedies of any of the Credit Parties under this Agreement, the Credit Agreement or any other Loan Document or the ability of the Credit Parties to exercise the same.
6.2 Unless and until any Pledgor receives notice that an Event of Default has occurred and is continuing, each Pledgor shall be entitled to receive and retain any and all cash dividends or other cash distributions paid on the Pledged Collateral (provided, however, that, following the satisfaction of the Discharge of Term Obligations and after the occurrence and during the continuance of a Cash Dominion Event, each Pledgor shall cause all such cash dividends or other cash distributions to be deposited into the Concentration Account in accordance with the provisions of Section 6.13 of the Credit Agreement) to the extent, and only to the extent, that such cash dividends or other cash distributions are permitted by, and otherwise paid in accordance with, the terms and conditions of this Agreement, the Credit Agreement, the other Loan Documents and applicable Law. All noncash dividends, and all dividends paid or payable in cash or otherwise in connection with a partial or total liquidation or dissolution, return of capital, capital surplus or paid-in surplus, and all other distributions (other than dividends and distributions referred to in the preceding sentence) made on or in respect of the Pledged Collateral, whether paid or payable in cash or otherwise, whether resulting from a subdivision, combination or reclassification of the outstanding capital stock, membership interests or other Equity Interests of the Issuer of any Pledged Securities or received in exchange for Pledged Securities or any part thereof, or in redemption thereof, or as a result of any merger, amalgamation, arrangement, consolidation, acquisition or other exchange of assets to which such Issuer may be a party or otherwise, shall be and become part of the Pledged Collateral, and, if received by any Pledgor, to the extent required to be paid to the Collateral Agent pursuant to the terms of the Credit Agreement or the other Loan Documents, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Collateral Agent and the Term Loan Collateral Agent and shall be forthwith delivered (except to the extent that such dividends or other cash distributions constitute Term Priority Collateral) to the Collateral Agent, in the same form as so received (with any necessary endorsement).
6.3 Upon the Pledgors receipt of notice that an Event of Default has occurred and is continuing, all rights of the Pledgors to dividends or other cash distributions that the Pledgors are authorized to receive pursuant to Section 6.2 above shall cease, and all such rights shall thereupon become vested in the Collateral Agent and the Term Loan Collateral Agent, subject to the terms of the Intercreditor Agreement, which shall have the sole and exclusive right and authority to receive and retain such dividends or other cash distributions. All dividends or other cash distributions received by the Pledgors contrary to the provisions of this Section 6.3 shall be held in trust for the benefit of the Collateral Agent and the Term Loan Collateral Agent, shall be segregated from other property or funds of the Pledgors and shall, subject to the Intercreditor Agreement, be forthwith delivered to the Concentration Account in accordance with the provisions of Section 6.13 of the Credit Agreement (with any necessary endorsement). Any and all money and other property paid over to or received by the Collateral Agent pursuant to the provisions of this Section 6.3 shall be applied in accordance with the provisions of Section 8. After all Events of Default have been cured or waived in writing by the Collateral Agent, each Pledgor will have the right to receive the dividends or other cash distributions that it would otherwise be entitled to receive pursuant to the terms of Section 6.2 above.
6.4 Upon the Pledgors receipt of notice that an Event of Default has occurred and is continuing, all rights of the Pledgors to exercise the voting and consensual rights and powers it is entitled to exercise pursuant to Section 6.1 shall cease, and all such rights shall thereupon become vested in the Collateral Agent, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers; provided that the Collateral Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived in writing by the Collateral Agent, each Pledgor will have the right to exercise the voting and consensual rights and powers that it would otherwise be entitled to exercise pursuant to the terms of Section 6.1.
SECTION 7
Remedies upon Default
Upon the occurrence and during the continuance of an Event of Default, it is agreed that the Collateral Agent shall have in any jurisdiction in which enforcement hereof is sought, in addition to all other rights and remedies, the rights and remedies of a secured party under the UCC or other applicable Law. The rights and remedies of the Collateral Agent shall include, without limitation, the right to take any or all of the following actions at the same or different times:
7.1 The Collateral Agent may sell or otherwise dispose of all or any part of the Pledged Collateral, at public or private sale or at any brokers board or on any securities exchange, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. Each purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Pledgor.
7.2 The Collateral Agent shall give each Pledgor at least ten (10) days prior written notice, by authenticated record, of the Collateral Agents intention to make any sale of the Pledged Collateral. Such notice, (i) in the case of a public sale, shall state the date, time and place for such sale, (ii) in the case of a sale at a brokers board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Pledged Collateral, or portion thereof, will first be offered for sale at such board or exchange, and (iii) in the case of a private sale, shall state the date after which any private sale or other disposition of the Pledged Collateral shall be made. Each Pledgor agrees that such written notice shall satisfy all requirements for notice to any Pledgor which are imposed under the UCC with respect to the exercise of the Collateral Agents rights and remedies upon default. The Collateral Agent shall not be obligated to make any sale or other disposition of any Pledged Collateral if it shall determine not to do so, regardless of the fact that notice of sale or other disposition of such Pledged Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned.
7.3 Any public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale.
7.4 At any public (or, to the extent permitted by applicable Law, private) sale made pursuant to this Section 7, the Collateral Agent or any other Credit Party may bid for or purchase, free (to the extent permitted by applicable Law) from any right of redemption, stay, valuation or appraisal on the part of any Pledgor, the Pledged Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to the Collateral Agent or such other Credit Party from any Pledgor on account of the Secured Obligations as a credit against the purchase price, and the Collateral Agent or such other Credit Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to the Pledgor therefor.
7.5 For purposes hereof, a written agreement to purchase the Pledged Collateral or any portion thereof shall be treated as a sale thereof. The Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Pledgor shall be entitled to the return of the Pledged Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full.
7.6 As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Pledged Collateral and to sell the Pledged Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver.
7.7 Each Pledgor recognizes that (a) the Collateral Agent may be unable to effect a public sale of all or a part of the Pledged Collateral by reason of certain prohibitions contained in the Securities Act of 1933, 15 U.S.C. §77, (as amended and in effect, the Securities Act) or the Securities laws of various states (the Blue Sky Laws), but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof, (b) that private sales so made may be at prices and upon other terms less favorable to the seller than if the Pledged Collateral were sold at public sales, (c) that neither the Collateral Agent nor any other Credit Party has any obligation to delay sale of any of the Pledged Collateral for the period of time necessary to permit the Pledged Collateral to be registered for public sale under the Securities Act or the Blue Sky Laws, and (d) that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.
7.8 To the extent permitted by applicable Law, each Pledgor hereby waives all rights of redemption, stay, valuation and appraisal which each Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. In dealing with or disposing of the Pledged Collateral or any part thereof, neither the Collateral Agent nor any other Credit Party shall be required to give priority or preference to any item of Pledged Collateral or otherwise to marshal assets or to take possession or sell any Pledged Collateral with judicial process.
SECTION 8
Application of Proceeds of Sale
After the occurrence and during the continuance of an Event of Default and acceleration of the Secured Obligations, the Collateral Agent shall apply the proceeds of any collection or sale of the Pledged Collateral, as well as any Pledged Collateral consisting of cash, in accordance with Section 8.03 of the Credit Agreement.
The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale or other disposition of the Pledged Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale or other disposition shall be a sufficient discharge to the purchaser or purchasers of the Pledged Collateral so sold or otherwise disposed of and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.
SECTION 9
[Reserved.]
SECTION 10
Further Assurances
Subject to the Intercreditor Agreement, each Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments, as the Collateral Agent may at any time reasonably request in connection with the administration and enforcement of this Agreement or with respect to the Pledged Collateral or any part thereof or in order better to assure and confirm unto the Collateral Agent its rights and remedies hereunder.
SECTION 11
Intent
This Agreement is being executed and delivered by the Pledgors for the purpose of confirming the grant of the security interest of the Collateral Agent in the Pledged Collateral. It is intended that the security interest granted pursuant to this Agreement is granted as a supplement to, and not in limitation of, the security interest granted to the Collateral Agent, for its own benefit and the benefit of the other Credit Parties, under the Security Agreement. All provisions of the Security Agreement (including, without limitation, the rights, remedies, powers, privileges and discretions of the Collateral Agent thereunder) shall apply to the Pledged Collateral. In the event of a conflict between this Agreement and the Security Agreement, the terms of this Agreement shall control with respect to the Pledged Collateral and the terms of the Security Agreement shall control with respect to all other Collateral.
SECTION 12
Termination; Release of Pledged Collateral
12.1 Any Lien upon any Pledged Collateral will be released automatically if the Pledged Collateral constitutes property being sold, transferred or disposed of in a Permitted Disposition. Upon at least two (2) Business Days prior written request by the Pledgors, the Collateral Agent shall execute such documents as may be necessary to evidence the release of the Liens upon any Pledged Collateral described in this Section 12.1; provided, however, that (i) the Collateral Agent shall not be required to execute any such document on terms which, in its reasonable opinion, would, under applicable Law, expose the Collateral Agent to liability or entail any adverse consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Secured Obligations or any Liens (other than those expressly being released) upon (or obligations of the Pledgors in respect of) all interests retained by the Pledgors, including, without limitation, the Proceeds of any sale, all of which shall continue to constitute part of the Pledged Collateral.
12.2 Except for those provisions which expressly survive the termination thereof, this Agreement and the Security Interest granted herein shall terminate when (i) the Commitments have expired or been terminated (ii) all of the Secured Obligations have been paid in full in cash or otherwise satisfied (other than any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement or the Credit Agreement) (iii) all L/C Obligations have been reduced to zero (or fully cash collateralized in a manner reasonably satisfactory to the applicable L/C Issuer and the Administrative Agent), and (iv) the L/C Issuers have no further obligation to issue Letters of Credit under the Credit Agreement, at which time the Collateral Agent shall return all Pledged Collateral to the Pledgors and execute and deliver to the Pledgors, at the Pledgors expense, all UCC termination statements, releases and similar documents that the Pledgors shall reasonably request to evidence such termination; provided, however, that the Credit Agreement, this Agreement, and the security interest granted herein shall be reinstated if at any time payment, or any part thereof, of any Secured Obligation is rescinded or must otherwise be restored by any Credit Party upon the bankruptcy or reorganization of any Pledgor. Any execution and delivery of termination statements, releases or other documents pursuant to this Section 12.2 shall be without recourse to, or warranty by, the Collateral Agent or any other Credit Party.
SECTION 13
Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 14
Intercreditor Agreement
Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the
Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and the terms of this Agreement, the terms of the Intercreditor Agreement shall govern and control.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
PLEDGORS: |
THE CONTAINER STORE, INC. | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS HOLDINGS, INC. | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS GIFT CARD SERVICES, LLC | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
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TCS INSTALLATION SERVICES, LLC | |
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By: |
/s/ Jodi Taylor |
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Name: |
Jodi Taylor |
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Title: |
Chief Financial Officer |
SIGNATURE PAGE
PLEDGE AGREEMENT- THE CONTAINER STORE, INC.-ABL
COLLATERAL AGENT: |
JPMORGAN CHASE BANK, N.A. | |
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By: |
/s/ Andrew Ray |
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Name: |
Andrew Ray |
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Title: |
Authorized Officer |
SIGNATURE PAGE
PLEDGE AGREEMENT- THE CONTAINER STORE, lNC.-ABL
SCHEDULE I
None of the issuers has any authorized, issued or outstanding shares of its capital stock or other Equity Interest of any class or any commitments to issue any shares of its capital stock or other Equity Interest of any class or any securities convertible into or exchangeable for any shares of its capital stock or other Equity Interest of any class except as otherwise stated in this Schedule I.
Issuer |
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Record Owner |
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Class of |
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Issued / |
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Number |
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Percentage |
The Container Store, Inc. |
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TCS Holdings, Inc. |
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Common Stock |
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1 |
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1 |
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100% / 100% |
TCS Gift Card Services, LLC |
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The Container Store, Inc. |
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Membership Interests |
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N/A |
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100% |
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100% / 100% |
TCS Installation Services, LLC |
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The Container Store, Inc. |
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Membership Interests |
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N/A |
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100% |
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100% / 100% |
Elfa International AB |
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The Container Store, Inc. |
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Share Capital |
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550,248 |
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550,248 |
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100% / 65% |
SCHEDULE II
Pledgors
The Container Store, Inc.
TCS Holdings, Inc.
TCS Gift Card Services, LLC
TCS Installation Services, LLC
Exhibit 10.15
ABL FACILITY SECURITY AGREEMENT
This ABL FACILITY SECURITY AGREEMENT (this Agreement), dated as of April 6, 2012, by and among The Container Store, Inc., a Texas corporation (the Borrower), each of the guarantors listed on Schedule I hereto (each such Person, individually, a Guarantor and, collectively, the Guarantors) (the Borrower and the Guarantors are hereinafter referred to, individually, as a Grantor and, collectively together with any subsidiary that becomes a party hereto pursuant to Section 4.15, as the Grantors), and JPMorgan Chase Bank, N.A., a national banking association, as collateral agent (in such capacity, the Collateral Agent) for its own benefit and the benefit of the other Credit Parties (as defined in the Credit Agreement referred to below), in consideration of the mutual covenants contained herein and benefits to be derived herefrom.
WITNESSETH:
WHEREAS, reference is made to that certain Credit Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Credit Agreement), by and among the Borrower, the Guarantors, JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the Administrative Agent) for its own benefit and the benefit of the other Credit Parties, the Collateral Agent and the lenders from time to time party thereto (individually, a Lender and, collectively, the Lenders), pursuant to which the Lenders have agreed to make Loans to the Borrower, and the L/C Issuers have agreed to issue Letters of Credit for the account of the Borrower, upon the terms and subject to the conditions specified therein; and
WHEREAS, the obligations of the Lenders to make Loans and of the L/C Issuers to issue Letters of Credit are each conditioned upon, among other things, the execution and delivery by the Grantors of an agreement in the form hereof to secure the Secured Obligations (as defined herein).
NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth in this Agreement, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Grantors and the Collateral Agent, on its own behalf and on behalf of the other Credit Parties (and each of their respective successors or permitted assigns), hereby agree as follows:
ARTICLE 1
Definitions
SECTION 1.01 Generally. All references herein to the UCC shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that if a term is defined in Article 9 of the UCC differently than in another Article thereof, the term shall have the meaning set forth in Article 9; provided further that, if by reason of mandatory provisions of law, perfection, or the effect of perfection or non-perfection, of the Security Interest in any Collateral or the availability of any remedy
hereunder is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, UCC means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or availability of such remedy, as the case may be.
SECTION 1.02 Definition of Certain Terms Used Herein. Unless the context otherwise requires, all capitalized terms used but not defined herein shall have the meanings set forth in the Credit Agreement. In addition, as used herein, the following terms shall have the following meanings:
ABL Priority Collateral shall have the meaning assigned to such term in the Intercreditor Agreement.
Accessions shall have the meaning given that term in the UCC.
Account Debtor shall have the meaning given that term in the UCC.
Administrative Agent shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Agreement shall have the meaning assigned to such term in the preamble of this Agreement.
Blue Sky Laws shall have the meaning assigned to such term in Section 6.01 of this Agreement.
Borrower shall have the meaning assigned to such term in the preamble of this Agreement.
Chattel Paper shall have the meaning given that term in the UCC.
Collateral shall mean all personal property and fixtures of each Grantor, including, without limitation, all: (a) Accounts, (b) Chattel Paper, (c) Commercial Tort Claims (including, but not limited to, those Commercial Tort Claims listed on Schedule 3.07 hereto), (d) Deposit Accounts, (e) Documents, (f) Equipment, (g) Fixtures, (h) General Intangibles (including Payment Intangibles), (i) Goods, (j) Instruments, (k) Inventory, (l) Investment Property, (m) Letter-of-Credit Rights, (n) Intellectual Property and Software, (o) Supporting Obligations, (p) money, policies and certificates of insurance, deposits, cash, or other property, (q) all books, records, and information relating to any of the foregoing ((a) through (p)) and/or to the operation of any Grantors business, and all rights of access to such books, records, and information, and all property in which such books, records, and information are stored, recorded and maintained, (r) all insurance proceeds, refunds, and premium rebates, including, without limitation, proceeds of fire and credit insurance, whether any of such proceeds, refunds, and premium rebates arise out of any of the foregoing ((a) through (q)) or otherwise, (s) all liens, guaranties, rights, remedies, and privileges pertaining to any of the foregoing ((a) through (r)), including the right of stoppage in transit, and (t) any of the foregoing, whether now owned or now due, or in which any Grantor has an interest, or
hereafter acquired, arising, or to become due, or in which any Grantor obtains an interest, and all products, Proceeds, substitutions, and Accessions of or to any of the foregoing; provided, however, that the Collateral shall not include, and the Security Interest shall not attach to: (i) any governmental licenses or state or local franchises, charters and authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby (except to the extent such prohibition or restriction is ineffective under the Uniform Commercial Code of any applicable jurisdiction) other than proceeds thereof, the assignment of which is expressly deemed effective under the Uniform Commercial Code of any applicable jurisdiction notwithstanding such prohibition, (ii) any asset the pledge of which or a security interest in which is prohibited by applicable law (including any requirement to obtain the consent of any Governmental Authority), (iii) equity interests in joint ventures or any non-wholly-owned Subsidiaries, but only to the extent that the organizational documents or other agreements with other equity holders do not permit or restrict the pledge of such equity interests, (iv) agreements, licenses and leases the pledge of which or the security interest in which is prohibited or restricted by such agreements, licenses and leases (including pursuant to any requirement to obtain the consent of any Governmental Authority or third party), to the extent prohibited or restricted thereby (except to the extent such prohibition or restriction is ineffective under the Uniform Commercial Code of any applicable jurisdiction) other than proceeds of such agreements, license or leases, the assignment of which is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibition, (v) any intent to use trademark applications, (vi) more than 65% of the outstanding Voting Equity Interests of any (x) CFC or (y) U.S. Subsidiary that is a disregarded entity for U.S. federal income tax purposes if substantially all of its assets consist of the capital stock of one or more Foreign Subsidiaries, (vii) Equity Interests in any Unrestricted Subsidiary, (viii) any fee owned real property with a value of less than $5.0 million and any leasehold interest in real property and (ix) any specifically identified asset with respect to which the Collateral Agent has determined in writing (in its reasonable judgment) that the costs of obtaining, perfecting or maintaining a security interest in such assets exceeds the fair market value (as determined by the Borrower in its reasonable judgment) thereof or the practical benefit to the Credit Parties afforded thereby.
Collateral Agent shall have the meaning assigned to such term in the preamble of this Agreement.
Collateral Agents Rights and Remedies shall have the meaning assigned to such term in Section 8.08.
Commercial Tort Claim shall have the meaning given that term in the UCC.
Commodity Account shall have the meaning given that term in the UCC.
Commodity Account Control Agreement shall mean, with respect to any Commodity Account as to which a Grantor is the Commodity Customer, an agreement by such Grantor, the Collateral Agent and the relevant Commodity Intermediary that the Commodity Intermediary will apply any value distributed on account of the Commodity Contracts carried in such Commodity Account as directed by the Collateral Agent without
further consent by such Grantor. Each such agreement must be satisfactory in form and substance to the Collateral Agent.
Commodity Contract shall have the meaning given that term in the UCC.
Commodity Customer shall have the meaning given that term in the UCC.
Commodity Intermediary shall have the meaning given that term in the UCC.
Control shall have the meaning given that term in the UCC.
Controlled Commodity Account shall mean a Commodity Account as to which (i) a Grantor is the Commodity Customer and (ii) a Commodity Account Control Agreement is in effect.
Controlled Deposit Account means a Deposit Account that is subject to a Deposit Account Control Agreement.
Controlled Securities Account shall mean a Securities Account that (i) is maintained in the name of a Grantor at an office of a Securities Intermediary located in the United States and (ii) together with all Financial Assets credited thereto and all related Security Entitlements, is subject to a Securities Account Control Agreement among such Grantor, the Collateral Agent and such Securities Intermediary.
Credit Agreement shall have the meaning assigned to such term in the preliminary statement of this Agreement.
Deposit Account shall have the meaning given that term in the UCC and shall also include all demand, time, savings, passbook, or similar accounts maintained with a bank or other financial institution.
Deposit Account Control Agreement shall mean, with respect to any Controlled Deposit Account, a Blocked Account Agreement, substantially in the form of Exhibit K to the ABL Credit Agreement (with any changes that the Collateral Agent and the Term Loan Collateral Agent shall have approved), or in such other form as reasonably acceptable to the Collateral Agent and the Term Loan Collateral Agent, in either case (i) providing that the relevant Depositary Bank will comply with instructions originated by the Collateral Agent or the Term Loan Collateral Agent, as applicable, directing disposition of the funds in such Deposit Account, without further consent by any Grantor, and (ii) subordinating to the Lien of the Credit Parties all claims of the Depositary Bank to such Controlled Deposit Account (except its right to deduct its normal operating charges and any uncollected funds previously credited thereto).
Depositary Bank shall mean a bank at which a Deposit Account is maintained.
Documents shall have the meaning given that term in the UCC.
Electronic Chattel Paper shall have the meaning given that term in the UCC.
Entitlement Orders shall have the meaning given that term in the UCC.
Equipment shall mean equipment, as defined in the UCC, and shall also mean all furniture, store fixtures, motor vehicles, rolling stock, machinery, office equipment, plant equipment, tools, dies, molds, and other goods, property, and assets which are used and/or were purchased for use in the operation or furtherance of a Grantors business, and any and all Accessions or additions thereto, and substitutions therefor.
Excluded Account means any (a) deposit account which is used for purposes of funding payroll, payroll taxes, employee benefit payments, (b) deposit accounts which are zero balance accounts, (c) other controlled disbursement accounts, (d) trust accounts, (e) petty cash accounts, (f) deposit accounts to the extent holding funds from unredeemed gift cards and (g) other deposit accounts with a demand deposit balance not exceeding $10,000 individually and $100,000 in the aggregate at any time.
Financial Asset shall have the meaning given that term in the UCC.
Financing Statement shall have the meaning given that term in the UCC.
Fixtures shall have the meaning given that term in the UCC.
General Intangibles shall have the meaning given that term in the UCC, and shall also include, without limitation, all: Payment Intangibles; rights to payment for credit extended; deposits; amounts due to any Grantor; credit memoranda in favor of any Grantor; warranty claims; tax refunds and abatements; insurance refunds and premium rebates; all means and vehicles of investment or hedging, including, without limitation, options, warrants, and futures contracts; records; customer lists; telephone numbers; goodwill; causes of action; judgments; rights to collect payments under any settlement or other agreement; literary rights; rights to performance; royalties; license and/or franchise fees; rights of admission; licenses, including, without limitation; franchises; license agreements, including all rights of any Grantor to enforce same; permits, certificates of convenience and necessity, and similar rights granted by any governmental authority; developmental ideas and concepts; proprietary processes; blueprints, drawings, designs, diagrams, plans, reports, and charts; catalogs; technical data; tapes, disks, semi-conductors chips and printouts; IP Collateral (as defined in the Intellectual Property Security Agreement); proposals; cost estimates, and reproductions on paper, or otherwise, of any and all concepts or ideas, and any matter related to, or connected with, the design, development, manufacture, sale, marketing, leasing, or use of any or all property produced, sold, or leased, by or credit extended or services performed, by any Grantor, whether intended for an individual customer or the general business of any Grantor, or used or useful in connection with research by any Grantor.
Goods shall have the meaning given that term in the UCC.
Grantor and Grantors shall have the meaning assigned to such terms in the preamble of this Agreement.
Guarantor and Guarantors shall have the meaning assigned to such terms in the preamble of this Agreement.
Indemnitee shall have the meaning assigned to such term in Section 8.06 of this Agreement.
Instruments shall have the meaning given that term in the UCC.
Intellectual Property Security Agreement shall mean that certain Intellectual Property Security Agreement dated the date hereof among the Borrower and the Collateral Agent.
Inventory shall have the meaning given that term in the UCC, and shall also include, without limitation, all: (a) Goods which (i) are leased by a Person as lessor, (ii) are held by a Person for sale or lease or to be furnished under a contract of service, (iii) are furnished by a Person under a contract of service, or (iv) consist of raw materials, work in process, or materials used or consumed in a business; (b) Goods of said description in transit; (c) Goods of said description which are returned, repossessed or rejected; and (d) packaging, advertising, and shipping materials related to any of the foregoing.
Investment Property shall have the meaning given that term in the UCC.
Joinder Agreement shall mean an agreement substantially in the form of Exhibit A hereto.
Lender and Lenders shall have the meaning assigned to such terms in the preliminary statement of this Agreement.
Letter-of-Credit Right shall have the meaning given that term in the UCC and shall also mean any right to payment or performance under a letter of credit, whether or not the beneficiary has demanded, or is at the time entitled to demand, payment or performance.
Letters of Credit shall have the meaning given that term in the UCC.
Payment Intangible shall have the meaning given that term in the UCC and shall also mean any General Intangible under which the Account Debtors primary obligation is a monetary obligation.
Permitted Dispositions shall mean any transfer, disposition or asset sale not prohibited by Section 7.05 of the Credit Agreement.
Permitted Liens shall mean Liens permitted pursuant to the terms of Section 7.01 of the Credit Agreement.
Proceeds shall mean proceeds, as defined in the UCC, and shall also mean each type of property described in the definition of Collateral.
Secured Obligations shall mean, collectively, the Obligations (as defined in the Credit Agreement).
Securities Act shall have the meaning assigned to such term in Section 6.01 of this Agreement.
Securities Account shall have the meaning given that term in the UCC.
Securities Account Control Agreement shall mean, when used with respect to a Securities Account, a Securities Account Control Agreement among the relevant Securities Intermediary, the relevant Grantor and the Collateral Agent to the effect that such Securities Intermediary will comply with Entitlement Orders originated by the Collateral Agent with respect to such Securities Account without further consent by the relevant Grantor.
Securities Intermediary shall have the meaning given that term in the UCC.
Security shall have the meaning given that term in the UCC.
Security Entitlement shall have the meaning given that term in the UCC.
Security Interest shall have the meaning assigned to such term in Section 2.01 of this Agreement.
Software shall have the meaning given that term in the UCC.
Supporting Obligation shall have the meaning given that term in the UCC and shall also refer to a Letter-of-Credit Right or secondary obligation that supports the payment or performance of an Account, Chattel Paper, a Document, a General Intangible, an Instrument, or Investment Property.
Term Loan Collateral Agent shall mean JPMorgan Chase Bank, N.A., in its capacity as Collateral Agent under the Term Facility, and its successors and permitted assigns.
Term Priority Collateral shall have the meaning assigned to such term in the Intercreditor Agreement.
Voting Equity Interests shall mean, with respect to any Person, the Equity Interests of all classes (or equivalent interests) which ordinarily, in the absence of contingencies, entitle holders thereof to vote for the election of directors (or Persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such contingency.
SECTION 1.03 Rules of Interpretation. The rules of interpretation specified in Article I of the Credit Agreement shall be applicable to this Agreement.
ARTICLE 2
Security Interest
SECTION 2.01 Security Interest. As security for the payment or performance, as the case may be, in full of the Secured Obligations, each Grantor hereby grants to the Collateral Agent, its successors and permitted assigns, for its own benefit and the benefit of the other Credit Parties, a security interest in all of such Grantors right, title and interest in, to and under the Collateral (the Security Interest). Without limiting the foregoing, each Grantor hereby designates the Collateral Agent as such Grantors true and lawful attorney, exercisable by the Collateral Agent whether or not an Event of Default exists, with full power of substitution, at the Collateral Agents option, to file one or more Financing Statements, continuation statements, or to sign other documents for the purpose of perfecting, confirming, continuing, or protecting the Security Interest granted by each Grantor, without the signature of any Grantor (each Grantor hereby appointing the Collateral Agent as such Persons attorney to sign such Persons name to any such instrument or document, whether or not an Event of Default exists), and naming any Grantor or the Grantors, as debtors, and the Collateral Agent, as secured party. Any such Financing Statement may indicate the Collateral as all assets of the Grantor, all personal property of the debtor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC.
SECTION 2.02 No Assumption of Liability. The Security Interest is granted as security only and shall not subject the Collateral Agent or any other Credit Party to, or in any way alter or modify, any obligation or liability of any Grantor with respect to or arising out of the Collateral.
ARTICLE 3
Representations and Warranties
The Grantors jointly and severally represent and warrant to the Collateral Agent and the other Credit Parties that:
SECTION 3.01 Title and Authority. Each Grantor has good and valid rights in, and title to, the Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other Person, other than any consent or approval which has been obtained.
SECTION 3.02 Filings. Upon the filing of UCC Financing Statements naming each Grantor as debtor and the Collateral Agent as secured party and containing a description of the Collateral in the office of the Secretary of State in the jurisdiction of organization of each Grantor and the filing of the Intellectual Property Security Agreement with the United States Patent and Trademark Office and United States Copyright Office, the Security Interest granted to the Collateral Agent (for its own benefit and the benefit of the
other Credit Parties) hereunder in respect of all Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States shall constitute a legal, valid and perfected security interest in the Collateral, and no further or subsequent filing, refiling, recording, re-recording, registration or re-registration is necessary in any such jurisdiction, except as provided under applicable Law with respect to the filing of continuation statements or as a result of any change in a Grantors name or jurisdiction of incorporation or formation or under any other circumstances under which, pursuant to the UCC, filings previously made have become misleading or ineffective in whole or in part.
SECTION 3.03 Validity and Priority of Security Interest. The Security Interest constitutes (a) a legal and valid security interest in all of the Collateral securing the payment and performance of the Secured Obligations, (b) subject to the making of the filings described in Section 3.02 above, a perfected security interest in all of the Collateral (to the extent perfection in the Collateral can be accomplished by such filing) and (c) subject to the obtaining of Control, a perfected security interest in all of the Collateral (to the extent perfection in the Collateral by Control is required hereunder). The Security Interest is and shall be prior to any other Lien on any of the Collateral, subject only to (i) with respect to the Term Priority Collateral only, Liens securing the obligations of the Grantors with respect to the Term Facility, and (ii) other Permitted Liens having priority by operation of applicable Law.
SECTION 3.04 Absence of Other Liens. The Collateral is owned by the Grantors free and clear of any Lien, except for (i) Permitted Liens or (ii) Liens for which termination statements or releases (or payoff letters providing for the delivery or filing of termination statements or releases) have been delivered to the Collateral Agent. Except, in each case, for Permitted Liens, the Grantors have not (a) filed or consented to the filing of (i) any Financing Statement or analogous document under the UCC or any other applicable Law covering any Collateral, (ii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Grantor assigns any Collateral or any security agreement or similar instrument covering any Collateral with any foreign governmental, municipal or other office, or (b) entered into any agreement in which any Grantor grants Control over any Collateral, which Financing Statement, control agreement or analogous document, assignment, security agreement or similar instrument is still in effect.
SECTION 3.05 Bailees, Warehousemen, Etc. Except as set forth on Schedule 3.05 hereto, no Inventory of any Grantor having an aggregate value in excess of $250,000 is in the care or custody of any third party or stored or entrusted with a bailee or other third party, except for companies providing transportation of merchandise in the ordinary course of such Grantors business.
SECTION 3.06 Consignments. As of the Closing Date, except as set forth on Schedule 3.06 hereto, no Grantor has possession of any property on consignment, the value of which exceeds $250,000 on an aggregate basis as to all Grantors. After the Closing Date, no Grantor shall have possession of any property on consignment, the value of which exceeds
$1.0 million on an aggregate basis as to all Grantors, unless a lien waiver or other agreement reasonably satisfactory to the Collateral Agent is delivered to the Collateral Agent by such consignor.
SECTION 3.07 Commercial Tort Claims. As of the date hereof, none of the Collateral consists of a Commercial Tort Claim having an individual value in excess of $1.0 million, except as set forth on Schedule 3.07 hereto.
SECTION 3.08 Instruments and Chattel Paper. As of the date hereof, no amounts payable under or in connection with any of the Collateral are evidenced by any Instrument or Chattel Paper with an individual face value in excess of $500,000 (or, with respect to all such Instruments or Chattel Paper, an aggregate face value in excess of $2.0 million), other than such Instruments and Chattel Paper listed in Schedule 3.08 hereto. Each Instrument and each item of Chattel Paper listed in Schedule 3.08 hereto has been properly endorsed, assigned and delivered to the Collateral Agent, accompanied by instruments of transfer or assignment duly executed in blank.
SECTION 3.09 Deposit Accounts, Securities Accounts and Commodity Accounts.
(a) As of the date hereof, no Grantor has any Deposit Accounts, Securities Accounts or Commodity Accounts other than those listed in Schedule 3.09 hereto.
(b) So long as the Collateral Agent has Control of a Controlled Deposit Account, the Lien of the Collateral Agent on such Controlled Deposit Account will be perfected, subject to no other Liens or rights of others (except Liens and rights of the relevant Depositary Bank that are Permitted Liens and the Lien of the Term Loan Collateral Agent).
(c) So long as the Financial Asset underlying any Security Entitlement owned by any Grantor is credited to a Controlled Securities Account, (i) the Collateral Agents Lien on such Security Entitlement will be perfected, subject to no other Liens or rights of others (except Liens and rights of the relevant Securities Intermediary that are Permitted Liens and the Lien of the Term Loan Collateral Agent), (ii) the Collateral Agent will have Control of such Security Entitlement and (iii) no action based on an adverse claim to such Security Entitlement or such Financial Asset, whether framed in conversion, replevin, constructive trust, equitable lien or other theory, may be asserted against the Collateral Agent or any other Credit Party.
(d) So long as any Commodity Account is subject to a Commodity Account Control Agreement, (i) the Liens on such Commodity Account and all Commodity Contracts carried therein will be perfected, subject to no other Liens or rights of others (except Liens and rights of the relevant Commodity Intermediary that are Permitted Liens and the Lien of the Term Loan Collateral Agent) and (ii) the Collateral Agent will have Control of such Commodity Account and all Commodity Contracts carried therein from time to time.
SECTION 3.10 Electronic Chattel Paper and Transferable Records. As of the date hereof, no amount under or in connection with any of the Collateral is evidenced by any Electronic Chattel Paper or any transferable record (as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act, as in effect in any relevant jurisdiction) with an individual face value in excess of $500,000 (or, with respect to all such Electronic Chattel Paper or transferable records, an aggregate face value in excess of $2.0 million), other than such Electronic Chattel Paper and transferable records listed in Schedule 3.10 hereto.
ARTICLE 4
Covenants
SECTION 4.01 Change of Name; Location of Collateral; Records; Place of Business.
(a) Each Grantor will furnish to the Collateral Agent at least ten (10) Business Days prior written notice (or such shorter period as to which the Collateral Agent in its sole discretion agrees) of any change in: (i) any Grantors name; (ii) any Grantors organizational structure or jurisdiction of incorporation or formation; (iii) any Grantors Federal Taxpayer Identification Number or organizational identification number, if any, assigned to it by its state of organization; or (iv) the location of any Grantors chief executive office. Each Grantor agrees not to effect or permit any change referred to in clauses (i) or (ii) of the preceding sentence unless all filings, publications and registrations have been made under the UCC or other applicable Law that are required in order for the Collateral Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Collateral (subject only to (i) with respect to the Term Priority Collateral only, Liens securing the obligations of the Grantors with respect to the Term Facility, and (ii) other Permitted Liens having priority by operation of applicable Law) for its own benefit and the benefit of the other Credit Parties.
(b) Each Grantor agrees (i) to maintain, at its own cost and expense, records with respect to the Collateral owned by it which are complete and accurate in all material respects and which are consistent with its current practices, but in any event to include accounting records which are complete in all material respects indicating all payments and proceeds received with respect to any part of the Collateral, and (ii) at such time or times as the Collateral Agent may reasonably request, promptly to prepare and deliver to the Collateral Agent a duly certified schedule or schedules in form and detail reasonably satisfactory to the Collateral Agent showing the identity, amount and location of any and all Collateral.
SECTION 4.02 Protection of Security. Each Grantor shall, at its own cost and expense, take any and all actions reasonably necessary to defend title to the Collateral against all Persons and to defend the Security Interest of the Collateral Agent in the Collateral and the priority thereof against any Lien (other than Permitted Liens).
SECTION 4.03 Further Assurances. Subject to the Intercreditor Agreement, each Grantor agrees, at its own expense, to execute, acknowledge and deliver all such further documents, Financing Statements, agreements and instruments and take all such further actions as the Collateral Agent may from time to time reasonably request to better assure, preserve, protect and perfect the Security Interest and the rights and remedies created hereby or the validity or priority of such Security Interest, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Security Interest and the filing of any Financing Statements or other documents in connection herewith or therewith. Without limiting the foregoing, each Grantor agrees, at its own expense, to execute, acknowledge and deliver all such further documents, Financing Statements, agreements and instruments and take all such further actions as the Collateral Agent may from time to time reasonably request to perfect the Collateral Agents Security Interest in all Collateral and the Proceeds therefrom (including causing the Collateral Agent to have Control of any such Collateral to the extent required hereunder and to the extent perfection in such Collateral can be accomplished by Control).
SECTION 4.04 Inspection and Verification. Each Grantor shall, and shall cause each of its Subsidiaries to, permit representatives and independent contractors of the Collateral Agent and each Lender to visit its properties and inspect the Collateral and all records related thereto (and to make extracts and copies from such records), to discuss its affairs, finances and accounts with its directors, officers and independent public accountants, and to conduct appraisals, commercial finance examinations and other evaluations, all in accordance with and subject to the terms and conditions of Section 6.10 of the Credit Agreement. The Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right to verify the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Collateral, including, in the case of Accounts or Collateral in the possession of any third Person, by contacting Account Debtors or the third Person possessing such Collateral for the purpose of making such a verification. The Collateral Agent shall have the right, subject to the confidentiality provisions of Section 11.07 of the Credit Agreement, to share any information it gains from such inspection or verification with any Credit Party. The Grantors shall pay the reasonable and documented in reasonable detail fees and expenses of the Collateral Agent or such other Persons with respect to such inspections and verifications to the extent required by the terms of Section 6.10 of the Credit Agreement.
SECTION 4.05 Taxes; Encumbrances. At its option, the Collateral Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Collateral (other than Permitted Liens), and may take any other action which the Collateral Agent may reasonably deem necessary or desirable to repair, maintain or preserve any of the Collateral to the extent any Grantor fails to do so as required by the Credit Agreement or this Agreement, and each Grantor jointly and severally agrees to reimburse the Collateral Agent on demand for any payment made or any expense incurred by the Collateral Agent pursuant to the foregoing authorization; provided, however, that the Collateral Agent shall not have any obligation to undertake any of the foregoing and shall have no liability on account of any action so undertaken except where a court of competent jurisdiction determines by final and nonappealable judgment that the
Collateral Agents actions constitute gross negligence or willful misconduct; provided further that the making of any such payments or the taking of any such action by the Collateral Agent shall not be deemed to constitute a waiver of any Default or Event of Default arising from the Grantors failure to have made such payments or taken such action. Nothing in this Section 4.05 shall be interpreted as excusing any Grantor from the performance of any covenants or other promises of any Grantor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.
SECTION 4.06 Assignment of Security Interest. Upon the occurrence and during the continuance of an Event of Default, and at the reasonable request of the Collateral Agent, if during such time any Grantor shall take a security interest in any property of an Account Debtor or any other Person to secure payment and performance of an Account with a value in excess of $250,000 (or, with respect to all such property, an aggregate value in excess of $1.0 million), such Grantor shall promptly assign such security interest to the Collateral Agent. Such assignment need not be filed of public record unless necessary to continue the perfected status of the security interest against creditors of, and transferees from, the Account Debtor or other Person granting the security interest.
SECTION 4.07 Continuing Obligations of the Grantors. Each Grantor shall remain liable to observe and perform all the conditions and obligations to be observed and performed by it under each material contract, agreement or instrument relating to the Collateral, all in accordance with the terms and conditions thereof, unless the failure to observe and perform any such conditions and obligations shall not result in a breach of any such material contract, agreement or instrument.
SECTION 4.08 Possession of Collateral. Each Grantor shall remain at all times in possession of the Inventory and Goods owned by it, except with respect to the following: (a) Eligible In-Transit Inventory and Inventory which is the subject of an Eligible Letter of Credit; (b) Inventory placed under the care, custody, storage or entrustment of a bailee or other third party, provided that such Grantor shall use commercially reasonable efforts to deliver to the Collateral Agent a Collateral Access Agreement with such bailee or other third party for all distribution centers and warehouses, (excluding any warehouse or other storage facility utilized by a store location for storage of inventory after shipment from a distribution center if the Cost of Inventory at such warehouse or other storage facility is less than $1.0 million), and for locations other than distribution centers and warehouses, only if the Cost of the Inventory at such location is greater than $1.0 million.
SECTION 4.09 Limitation on Modification of Accounts. None of the Grantors will, without the Collateral Agents prior written consent, grant any extension of the time of payment of any of the Accounts, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any Person liable for the payment thereof or allow any credit or discount whatsoever thereon, except, in each case, for extensions, releases, credits, discounts, compromises or settlements granted or made in the ordinary course of business or consistent with its current practices.
SECTION 4.10 Insurance.
(a) Each Grantor shall (i) maintain or shall cause to be maintained such insurance as is required pursuant to Section 6.07 of the Credit Agreement; and (ii) furnish to the Collateral Agent such information as to the insurance carried as the Collateral Agent may reasonably request from time to time.
(b) Each Grantor hereby irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantors true and lawful agent (and attorney-in-fact), exercisable only after the occurrence and during the continuance of a Cash Dominion Event, for the purpose of making, settling and adjusting claims in respect of Collateral under policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Grantor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or to pay any premium in whole or in part relating thereto, the Collateral Agent may, without waiving or releasing any obligation or liability of the Grantors hereunder or any Default or Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Collateral Agent deems advisable. All sums disbursed by the Collateral Agent in connection with this Section 4.10(b), including reasonable attorneys fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Grantors to the Collateral Agent and shall be additional Secured Obligations secured hereby.
SECTION 4.11 Commercial Tort Claims. If any Grantor shall at any time hold or acquire a Commercial Tort Claim for which a complaint has been filed in a court of competent jurisdiction having a value in excess of $1.0 million, such Grantor shall promptly (but, in any event, within ten (10) Business Days) notify the Collateral Agent in writing of the details thereof, and the Grantors shall take such actions as the Collateral Agent shall reasonably request in order to grant to the Collateral Agent, for the ratable benefit of the Credit Parties, a perfected security interest therein and in the Proceeds thereof.
SECTION 4.12 Legend. Upon the occurrence and during the continuance of an Event of Default, and at the reasonable request of the Collateral Agent, each Grantor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, its Accounts and its books, records and documents evidencing or pertaining thereto with an appropriate reference to the fact that such Accounts have been assigned to the Collateral Agent, for its own benefit and the benefit of the other Credit Parties, and that the Collateral Agent has a security interest therein.
SECTION 4.13 Other Actions. In order to further ensure the attachment, perfection and priority of, and the ability of the Collateral Agent to enforce, the Collateral Agents Security Interest in the Collateral, each Grantor covenants and agrees, in each case at
such Grantors own expense, to take the following actions with respect to the following Collateral:
(a) If any amount then payable under or in connection with any of the Collateral shall become evidenced by any Instrument or Chattel Paper with an individual face value in excess of $500,000 (or, with respect to all such Instruments or Chattel Paper, an aggregate face value in excess of $2.0 million), other than such Instruments and Chattel Paper listed in Schedule 3.08 hereto, the Grantor acquiring such Instrument or Chattel Paper shall promptly (but, in any event, within ten (10) Business Days after receipt thereof) endorse, assign and deliver the same (i) if the same constitutes Proceeds of the Term Priority Collateral, to the Term Loan Collateral Agent (with copies to the Collateral Agent), and (ii) if the same constitutes ABL Priority Collateral, to the Collateral Agent (with copies to the Term Loan Collateral Agent), accompanied by such instruments of transfer or assignment duly executed in blank as the Collateral Agent or the Term Loan Collateral Agent may from time to time specify.
(b) Subject to the provisions of Section 5.01, no Grantor shall hereafter establish and maintain any Deposit Account, Securities Account or Commodity Account with any Depositary Bank, Securities Intermediary or Commodity Intermediary unless (i) such Depositary Bank, Securities Intermediary or Commodity Intermediary shall be reasonably acceptable to the Collateral Agent, and (ii) such Depositary Bank, Securities Intermediary or Commodity Intermediary, as the case may be, and such Grantor shall have duly executed and delivered a Deposit Account Control Agreement, Security Account Control Agreement or Commodity Account Control Agreement, as the case may be, with respect to such Deposit Account, Securities Account or Commodity Account, as the case may be. Each Grantor shall accept any cash and Investment Property in trust for the benefit of the Collateral Agent and promptly after actual receipt thereof (within a reasonable period of time not to exceed five (5) Business Days), deposit any and all cash and Investment Property received by it into a Controlled Deposit Account, a Controlled Commodity Account or a Controlled Securities Account. The Collateral Agent agrees with each Grantor that the Collateral Agent shall not give any entitlement orders or instructions or directions to any issuer of uncertificated securities, Securities Intermediary or Commodity Intermediary, and shall not withhold its consent to the exercise of any withdrawal or dealing rights by such Grantor, unless an Event of Default has occurred and is continuing or would occur after giving effect to any such investment and withdrawal rights. The provisions of this Section 4.13(b) shall not apply to (a) any Excluded Account and (b) any Financial Assets credited to a Securities Account for which the Collateral Agent is the Securities Intermediary. No Grantor shall grant Control over any Investment Property comprised of Equity Interests in any Subsidiary to any person other than the Collateral Agent or the Term Loan Collateral Agent.
(c) As between the Collateral Agent and the Grantors, the Grantors shall bear the investment risk with respect to the Investment Property and Pledged Securities (as that term is defined in the Pledge Agreement), and the risk of loss of,
damage to, or the destruction of, the Investment Property and Securities (except where a court of competent jurisdiction determines by final and nonappealable judgment that such loss, damage or destruction has resulted from the gross negligence or willful misconduct of the Collateral Agent), whether in the possession of, or maintained as a Security Entitlement or deposit by, or subject to the Control of, the Collateral Agent, a Securities Intermediary, a Commodity Intermediary, any Grantor or any other Person.
(d) If any amount payable under or in connection with any of the Collateral shall become evidenced by any Electronic Chattel Paper or any transferable record with an individual face value in excess of $500,000 (or, with respect to all such Electronic Chattel Paper or transferable records, an aggregate face value in excess of $2.0 million), other than such Electronic Chattel Paper and transferable records listed in Schedule 3.10 hereto, the Grantor acquiring such Electronic Chattel Paper or transferable record shall promptly notify (i) if such amount payable constitutes Proceeds of the ABL Priority Collateral, the Collateral Agent (with copies to the Term Loan Collateral Agent) thereof, and (ii) if such amount payable constitutes Proceeds of the Term Priority Collateral, the Term Loan Collateral Agent (with copies to the Collateral Agent) thereof, and, in each case, shall take such action as the applicable Collateral Agent may reasonably request to vest in such Collateral Agent Control of such Electronic Chattel Paper under Section 9-105 of the UCC or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such jurisdiction, of such transferable record. The Collateral Agent agrees with each Grantor that the Collateral Agent will arrange, pursuant to procedures satisfactory to the Collateral Agent and so long as such procedures will not result in the Collateral Agents loss of control, for the Grantor to make alterations to the Electronic Chattel Paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless a Cash Dominion Event has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such Electronic Chattel Paper or transferable record.
(e) If any Grantor is at any time a beneficiary under a Letter of Credit (other than a Letter of Credit constituting a Supporting Obligation) now or hereafter issued having a face value in an amount in excess of $500,000 (or with respect to all such Letters of Credit, having an aggregate face value in an amount in excess of $2.0 million), such Grantor shall promptly notify the Collateral Agent thereof and such Grantor shall, at the request of the Collateral Agent, pursuant to an agreement in form and substance reasonably satisfactory to the Collateral Agent, either (i) arrange for the issuer and any confirmer of such Letter of Credit to consent to an assignment to the Collateral Agent of the proceeds of any drawing under the Letter of Credit and to cause the proceeds of any drawing under such Letter of Credit to be paid directly to the Collateral Agent after the occurrence and during the continuance of any Cash Dominion Event, or (ii) arrange for the Collateral Agent to become the transferee
beneficiary of such Letter of Credit, with the Collateral Agent agreeing, in each case, that the proceeds of any drawing under the Letter of Credit are to be paid directly to the Collateral Agent after the occurrence and during the continuance of any Cash Dominion Event and applied as provided in the Credit Agreement.
(f) Prior to the satisfaction of the Discharge of Term Obligations, with respect to any obligation under this Agreement, any other Collateral Document, or the Credit Agreement to deliver possession or control of any Collateral on which there is a Second Priority Lien by the Collateral Agent, such obligation shall be deemed satisfied by the delivery of possession or control of such Collateral to the Collateral Agent for the Term Facility (holding for the benefit of the Collateral Agent for the Credit Parties).
SECTION 4.15 Joinder of Additional Grantors. Upon the formation or acquisition of any new direct or indirect Subsidiary (other than any Unrestricted Subsidiary, a CFC or a Subsidiary that is held directly or indirectly by a CFC) by any Grantor, then the Grantors shall, at the Grantors expense, cause such Subsidiary to execute and deliver to the Collateral Agent a Joinder Agreement substantially in the form of Exhibit A hereto and to comply with the requirements of Section 6.12 of the Credit Agreement, within the time periods specified therein, and, upon such execution and delivery, such Subsidiary shall constitute a Grantor for all purposes hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of such Joinder Agreement shall not require the consent of any Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Agreement.
ARTICLE 5
Deposit Accounts; Securities Accounts;
Commodity Accounts; Power of Attorney
SECTION 5.01 Deposit Accounts; Collections.
(a) In addition to the requirements set forth in Section 6.13(a)(ii) of the Credit Agreement with respect to Deposit Accounts of the Grantors in existence on the Closing Date, (i) in the case of any Person that becomes a Grantor after the Closing Date, on the date on which such Person signs and delivers its Joinder Agreement, and (ii) in the case of any Deposit Account opened by any Grantor after the Closing Date, promptly after opening such Deposit Account, such Grantor shall, with respect to each Deposit Account then maintained by it, enter into (and cause the relevant Depositary Bank to enter into) a Deposit Account Control Agreement in respect of such Deposit Account and shall deliver such Deposit Account Control Agreement to the Collateral Agent (which shall enter into the same). All cash owned by such Grantor shall have been deposited, or after receipt thereof (within a reasonable period of time not to exceed three (3) Business Days) shall be deposited, in one or more Controlled Deposit
Accounts, in each case with a Depositary Bank the jurisdiction of which (determined as provided in UCC Section 9-304) shall at all times be a jurisdiction in which Article 9 of the UCC is in effect.
(b) Notwithstanding the foregoing, such Grantor has the right not to comply with the requirements of preceding clause (a) with respect to Deposit Accounts that are Excluded Accounts, provided, however, that if an Event of Default occurs and is continuing, the Collateral Agent may terminate the foregoing right not to comply, by giving at least 10 Business Days notice of such termination to the relevant Grantor.
(c) Each Grantor shall at all times comply with the cash management provisions of Section 6.13 of the Credit Agreement including, without limitation, after the occurrence and during the continuance of a Cash Dominion Event, causing the ACH or wire transfer no less frequently than daily (and whether or not there are then any outstanding Secured Obligations) of all cash receipts and collections into the Concentration Account or a Blocked Account, as provided for in the Credit Agreement.
(d) Without the prior written consent of the Collateral Agent (which consent shall not be unreasonably withheld), no Grantor shall modify or amend the instructions pursuant to any of the Credit Card Notifications or the Blocked Account Agreements. So long as no Event of Default has occurred and is continuing, each Grantor shall, and the Collateral Agent hereby authorizes each Grantor to, enforce and collect all amounts owing on the Inventory and Accounts, for the benefit and on behalf of the Collateral Agent and the other Credit Parties; provided, however, that such authorization may, at the direction of the Collateral Agent, be terminated upon the occurrence and during the continuance of any Event of Default.
SECTION 5.02 Security Accounts; Commodity Accounts.
(a) Within 90 days after the Closing Date (or, in the case of any Person that thereafter becomes a Grantor, on the date on which such Person signs and delivers its Joinder Agreement), each Grantor shall enter into (and cause the relevant Securities Intermediary to enter into) a Securities Account Control Agreement in respect of each Security Entitlement owned by such Grantor and the Securities Account to which the underlying Financial Asset is credited and deliver such Securities Account Control Agreement to the Collateral Agent (which shall enter into the same). Thereafter, whenever such Grantor acquires any other Security Entitlement, such Grantor shall, as promptly as practicable, cause the underlying Financial Asset to be credited to a Controlled Securities Account.
(b) Within 90 days after the Closing Date (or, in the case of any Person that thereafter becomes a Grantor, on the date on which such Person signs and delivers a Joinder Agreement), each Grantor shall enter into (and cause the relevant Commodity Intermediary to enter into) a Commodity Account Control Agreement in respect of
each Commodity Account owned by such Grantor and shall deliver such Commodity Account Control Agreement to the Collateral Agent (which shall enter into the same). Thereafter, such Grantor shall cause each Commodity Contract owned by it to be carried at all times in a Controlled Commodity Account.
SECTION 5.03 Power of Attorney. Each Grantor irrevocably makes, constitutes and appoints the Collateral Agent (and all officers, employees or agents designated by the Collateral Agent) as such Grantors true and lawful agent and attorney-in-fact, and in such capacity the Collateral Agent shall have the right, with power of substitution for each Grantor and in each Grantors name or otherwise, for the use and benefit of the Collateral Agent and the other Credit Parties, (a) at any time, whether or not a Cash Dominion Event has occurred, to take actions required to be taken by the Grantors under Section 2.01 of this Agreement, (b) upon the occurrence and during the continuance of a Cash Dominion Event or as otherwise permitted under the Credit Agreement, (i) to take actions required to be taken by the Grantors under Section 5.01 of this Agreement; and (ii) to receive, endorse, assign and/or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof, and (c) upon the occurrence and during the continuance of an Event of Default or as otherwise permitted under the Credit Agreement, (i) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral; (ii) to sign the name of any Grantor on any invoices, schedules of Collateral, freight or express receipts, or bills of lading storage receipts, warehouse receipts or other documents of title relating to any of the Collateral; (iii) to sign the name of any Grantor on any notice to such Grantors Account Debtors; (iv) to sign the name of any Grantor on any proof of claim in bankruptcy against Account Debtors, and on notices of lien, claims of mechanics liens, or assignments or releases of mechanics liens securing the Accounts; (v) to sign change of address forms to change the address to which each Grantors mail is to be sent to such address as the Collateral Agent shall designate; (vi) to receive and open each Grantors mail, remove any Proceeds of Collateral therefrom and turn over the balance of such mail either to the Borrower or to any trustee in bankruptcy or receiver of a Grantor, or other legal representative of a Grantor whom the Collateral Agent reasonably determines to be the appropriate person to whom to so turn over such mail; (vii) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral; (viii) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral; (ix) to take all such action as may be reasonably necessary to obtain the payment of any letter of credit and/or bankers acceptance of which any Grantor is a beneficiary; (x) to repair, manufacture, assemble, complete, package, deliver, alter or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any customer of any Grantor; (xi) to use, license or transfer any or all General Intangibles of any Grantor, subject to those restrictions to which such Grantor is subject under applicable Law and by contract; and (xii) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things reasonably necessary to carry out the purposes of this Agreement, as fully and completely as though the Collateral Agent was the absolute owner of the Collateral for all purposes; provided, however, that nothing herein contained shall be construed as requiring or obligating the Collateral Agent or any other Credit Party to
make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Collateral Agent or any other Credit Party, or to present or file any claim or notice. It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Grantors for the purposes set forth above is coupled with an interest and is irrevocable.
SECTION 5.04 No Obligation to Act. The Collateral Agent shall not be obligated to do any of the acts or to exercise any of the powers authorized by Section 5.03, but if the Collateral Agent elects to do any such act or to exercise any of such powers, it shall not be accountable for more than it actually receives as a result of such exercise of power, and shall not be responsible to any Grantor for any act or omission to act, except where a court of competent jurisdiction determines by final and nonappealable judgment that the subject act or omission to act has resulted from the gross negligence or willful misconduct of the Collateral Agent. The provisions of Section 5.03 shall in no event relieve any Grantor of any of its obligations hereunder or under any other Loan Document with respect to the Collateral or any part thereof or impose any obligation on the Collateral Agent or any other Credit Party to proceed in any particular manner with respect to the Collateral or any part thereof, or in any way limit the exercise by the Collateral Agent or any other Credit Party of any other or further right which it may have on the date of this Agreement or hereafter, whether hereunder, under any other Loan Document, by applicable Law or otherwise.
ARTICLE 6
Remedies
SECTION 6.01 Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default, it is agreed that the Collateral Agent shall have in any jurisdiction in which enforcement hereof is sought, in addition to all other rights and remedies, the rights and remedies of a secured party under the UCC or other applicable Law. The rights and remedies of the Collateral Agent shall include, without limitation, the right to take any or all of the following actions at the same or different times:
(a) With respect to any Collateral consisting of Accounts, General Intangibles (including Payment Intangibles), Letter-of-Credit Rights, Instruments, Chattel Paper, Documents, and Investment Property, the Collateral Agent may collect the Collateral with or without the taking of possession of any of the Collateral.
(b) With respect to any Collateral consisting of Accounts, the Collateral Agent may: (i) demand, collect and receive any amounts relating thereto, as the Collateral Agent may determine; (ii) commence and prosecute any actions in any court for the purposes of collecting any such Accounts and enforcing any other rights in respect thereof; (iii) defend, settle or compromise any action brought and, in connection therewith, give such discharges or releases as the Collateral Agent may reasonably deem appropriate; (iv) without limiting the Collateral Agents rights set forth in Section 5.03 hereof, receive, open mail addressed to any Grantor and endorse checks, notes, drafts, acceptances, money orders, bills of lading, warehouse receipts or
other instruments or documents evidencing payment, shipment or storage of the goods giving rise to such Accounts or securing or relating to such Accounts, on behalf of and in the name of such Grantor; and (v) sell, assign, transfer, make any agreement in respect of, or otherwise deal with or exercise rights in respect of, any such Accounts or the goods or services which have given rise thereto, as fully and completely as though the Collateral Agent was the absolute owner thereof for all purposes.
(c) With respect to any Collateral consisting of Investment Property, the Collateral Agent may, upon notice to any Grantor: (i) exercise all rights of any Grantor with respect thereto, including without limitation, the right to exercise all voting and corporate rights at any meeting of the shareholders of the Issuer (as defined in the Pledge Agreement) of any Investment Property and to exercise any and all rights of conversion, exchange, subscription or any other rights, privileges or options pertaining to any Investment Property as if the Collateral Agent was the absolute owner thereof, including the right to exchange, at its discretion, any and all of any Investment Property upon the merger, consolidation, reorganization, recapitalization or other readjustment of the Issuer thereof, all without liability except to account for property actually received as provided in Section 5.04 hereof; (ii) transfer such Collateral at any time to itself, or to its nominee, and receive the income thereon and hold the same as Collateral hereunder or apply it to the Secured Obligations; and (iii) demand, sue for, collect or make any compromise or settlement it deems desirable. The Grantors recognize that (a) the Collateral Agent may be unable to effect a public sale of all or a part of the Investment Property by reason of certain prohibitions contained in the Securities Act of 1933, 15 U.S.C. §77, (as amended and in effect, the Securities Act) or the Securities laws of various states (the Blue Sky Laws), but may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the Investment Property for their own account, for investment and not with a view to the distribution or resale thereof, (b) that private sales so made may be at prices and upon other terms less favorable to the seller than if the Investment Property were sold at public sales, (c) that neither the Collateral Agent nor any other Credit Party has any obligation to delay sale of any of the Investment Property for the period of time necessary to permit the Investment Property to be registered for public sale under the Securities Act or the Blue Sky Laws, and (d) that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner, provided that such sales are conducted in accordance with applicable Law. Notwithstanding anything herein to the contrary, no Grantor shall be required to register, or cause the registration of, any Investment Property under the Securities Act or any Blue Sky Laws.
(d) With respect to any Collateral consisting of Inventory, the Collateral Agent and/or representatives and independent contractors of the Collateral Agent may, but shall not be obligated to, repair, manufacture, assemble, complete, package, deliver, alter or supply any work-in-process Inventory, if any, necessary to fulfill in whole or in part the purchase order of any customer of any Grantor, all at the expense of the Grantors.
(e) With respect to any Collateral consisting of Inventory, Goods, and Equipment, the Collateral Agent may conduct one or more going out of business sales, in the Collateral Agents own right or by one or more agents and contractors. Such sale(s) may be conducted upon any premises owned, leased, or occupied by any Grantor. The Collateral Agent and any such agent or contractor, in conjunction with any such sale, may augment the Inventory with other goods (all of which other goods shall remain the sole property of the Collateral Agent or such agent or contractor). Any amounts realized from the sale of such goods which constitute augmentations to the Inventory (net of an allocable share of the costs and expenses incurred in their disposition) shall be the sole property of the Collateral Agent or such agent or contractor and neither any Grantor nor any Person claiming under or in right of any Grantor shall have any interest therein. Each purchaser at any such going out of business sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor.
(f) With or without legal process and with or without prior notice or demand for performance, the Collateral Agent may enter upon, occupy, and use any premises owned or occupied by each Grantor, and may exclude the Grantors from such premises or portion thereof as may have been so entered upon, occupied, or used by the Collateral Agent. The Collateral Agent shall not be required to remove any of the Collateral from any such premises upon the Collateral Agents taking possession thereof, and may render any Collateral unusable to the Grantors. In no event shall the Collateral Agent be liable to any Grantor for use or occupancy by the Collateral Agent of any premises pursuant to this Section 6.01(f), nor for any charge (such as wages for the Grantors employees and utilities) incurred in connection with the Collateral Agents exercise of the Collateral Agents Rights and Remedies (as defined herein) hereunder, other than for direct or actual damages resulting from the gross negligence or willful misconduct of the Collateral Agent as determined by a final and nonappealable judgment of a court of competent jurisdiction.
(g) The Collateral Agent may require any Grantor to assemble the Collateral and make it available to the Collateral Agent at the Grantors sole risk and expense at a place or places which are reasonably convenient to both the Collateral Agent and such Grantor.
(h) Each Grantor agrees that the Collateral Agent shall have the right, subject to applicable Law, to sell or otherwise dispose of all or any part of the Collateral, at public or private sale, for cash, upon credit or for future delivery as the Collateral Agent shall deem appropriate. Each Grantor further agrees that any such sale of all or any part of the Collateral consisting of Inventory for consideration in an amount equal to the balance of the purchase price (minus any customer deposits previously collected by such Grantor) shall be commercially reasonable. Each purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Grantor.
(i) Unless the Collateral is perishable or threatens to decline speedily in value, or is of a type customarily sold on a recognized market (in which event the Collateral Agent shall provide the Grantors such advance notice as may be practicable under the circumstances), the Collateral Agent shall give the Grantors at least ten (10) days prior written notice, by authenticated record, of the date, time and place of any proposed public sale, and of the date after which any private sale or other disposition of the Collateral may be made. Each Grantor agrees that such written notice shall satisfy all requirements for notice to that Grantor which are imposed under the UCC or other applicable Law with respect to the exercise of the Collateral Agents Rights and Remedies upon default. The Collateral Agent shall not be obligated to make any sale or other disposition of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale or other disposition of such Collateral shall have been given. The Collateral Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned.
(j) Any public sale shall be held at such time or times within ordinary business hours and at such place or places as the Collateral Agent may fix and state in the notice of such sale. At any sale or other disposition, the Collateral, or portion thereof, to be sold may be sold in one lot as an entirety or in separate parcels, as the Collateral Agent may (in its sole and absolute discretion) determine. If any of the Collateral is sold, leased, or otherwise disposed of by the Collateral Agent on credit, the Secured Obligations shall not be deemed to have been reduced as a result thereof unless and until payment in full is received thereon by the Collateral Agent. In the event that the purchaser fails to pay for the Collateral, the Collateral Agent may resell the Collateral and apply the proceeds from such resale in accordance with the terms of Section 6.02 of this Agreement.
(k) At any public (or, to the extent permitted by applicable Law, private) sale made pursuant to this Section 6.01, the Collateral Agent or any other Credit Party may bid for or purchase, free (to the extent permitted by applicable Law) from any right of redemption, stay, valuation or appraisal on the part of any Grantor, the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to the Collateral Agent or such other Credit Party from any Grantor on account of the Secured Obligations as a credit against the purchase price, and the Collateral Agent or such other Credit Party may, upon compliance with the terms of sale, hold, retain and dispose of such property without further accountability to any Grantor therefor.
(l) For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof. The Collateral Agent shall be free to carry out such sale pursuant to such agreement and no Grantor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Collateral Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Secured Obligations paid in full.
(m) As an alternative to exercising the power of sale herein conferred upon it, the Collateral Agent may proceed by a suit or suits at law or in equity to foreclose upon the Collateral and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver.
(n) To the extent permitted by applicable Law, each Grantor hereby waives all rights of redemption, stay, valuation and appraisal which such Grantor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.
SECTION 6.02 Application of Proceeds. After the occurrence and during the continuance of an Event of Default and acceleration of the Secured Obligations, the Collateral Agent shall apply the proceeds of any collection or sale of the Collateral, as well as any Collateral consisting of cash, or any Collateral granted under any other of the Collateral Documents, in accordance with Section 8.03 of the Credit Agreement.
The Collateral Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale or other disposition of the Collateral by the Collateral Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Collateral Agent or of the officer making the sale or other disposition shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold or otherwise disposed of and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Collateral Agent or such officer or be answerable in any way for the misapplication thereof.
ARTICLE 7
Perfection of Security Interest
SECTION 7.01 Perfection by Filing. This Agreement constitutes an authenticated record, and each Grantor hereby authorizes the Collateral Agent, pursuant to the provisions of Section 2.01 and Section 5.03, to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral, in such filing offices as the Collateral Agent shall reasonably deem appropriate, and the Grantors shall pay the Collateral Agents reasonable costs and expenses incurred in connection therewith.
SECTION 7.02 Other Perfection, Etc. The Grantors shall at any time and from time to time take such steps as the Collateral Agent may reasonably request for the Collateral Agent (a) to the extent required by Section 4.08 of this Agreement, to obtain an acknowledgment, in form and substance reasonably satisfactory to the Collateral Agent, of any bailee having possession of any of the Collateral that the bailee holds such Collateral for the Collateral Agent, (b) to the extent required by this Agreement or the Credit Agreement, to obtain Control of any Investment Property, Deposit Accounts, Letter-of-Credit Rights or Electronic Chattel Paper, with any agreements establishing Control to be in form and
substance reasonably satisfactory to the Collateral Agent and (c) otherwise to insure the continued perfection of the Collateral Agents security interest in any of the Collateral with the priority described in Section 3.03 and of the preservation of its rights therein.
SECTION 7.03 Savings Clause. Nothing contained in this Article 7 shall be construed to narrow the scope of the Collateral Agents Security Interest in any of the Collateral or the perfection or priority thereof or to impair or otherwise limit any of the Collateral Agents Rights and Remedies hereunder except (and then only to the extent) as mandated by the UCC.
ARTICLE 8
Miscellaneous
SECTION 8.01 Notices. All communications and notices hereunder shall (except as otherwise expressly permitted herein) be in writing and given as provided in Section 11.02 of the Credit Agreement.
SECTION 8.02 Grant of Non-Exclusive License. Without limiting the provisions of Section 6.01 hereof or any other rights of the Collateral Agent as the holder of a Lien on any IP Collateral (as defined in the Intellectual Property Security Agreement), each Grantor, subject to those restrictions to which such Grantor is subject under applicable Law and by contract, hereby grants to the Collateral Agent, and the representatives and independent contractors of the Collateral Agent, a royalty free, non-exclusive, irrevocable license, to use, apply, and affix any trademark, trade name, logo, or the like in which any Grantor now or hereafter has rights, such license to be effective only upon the occurrence and during the continuance of any Event of Default in connection with the Collateral Agents exercise of the Collateral Agents Rights and Remedies hereunder including, without limitation, in connection with any completion of the manufacture of Inventory or any sale or other disposition of Inventory. The license granted in this Section 8.02 shall remain in full force and effect throughout the term of this Agreement, notwithstanding the release of any Grantor hereunder.
SECTION 8.03 Security Interest Absolute. All rights of the Collateral Agent hereunder, the Security Interest and all obligations of the Grantors hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Secured Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document, or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from the Guaranty or any other guarantee, securing or guaranteeing all or any of the Secured Obligations, or (d) any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Grantor in respect of the Secured Obligations or this Agreement.
SECTION 8.04 Survival of Agreement. All covenants, agreements, representations and warranties made by the Grantors herein and in any other Loan Document and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Collateral Agent and the other Credit Parties and shall survive the execution and delivery of this Agreement and the other Loan Documents and the making of any Loans and the issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Collateral Agent, any L/C Issuer or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended under the Credit Agreement, and shall continue in full force and effect unless terminated in accordance with Section 8.14 hereof.
SECTION 8.05 Binding Effect; Several Agreement; Assignments. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party, and all covenants, promises and agreements by or on behalf of the Grantors that are contained in this Agreement shall bind and inure to the benefit of each Grantor and its respective successors and permitted assigns. This Agreement shall be binding upon each Grantor and the Collateral Agent and their respective successors and permitted assigns, and shall inure to the benefit of each Grantor, the Collateral Agent and the other Credit Parties and their respective successors and permitted assigns, except that no Grantor shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such attempted assignment or transfer shall be void) except as expressly permitted by this Agreement or the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, waived or released with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.
SECTION 8.06 Collateral Agents Fees and Expenses; Indemnification.
(a) Without limiting or duplicating any of their obligations under the Credit Agreement, the Guaranty or the other Loan Documents, the Grantors jointly and severally agree to pay all reasonable and documented in reasonable detail out-of-pocket expenses incurred by the Collateral Agent, including the reasonable fees, charges and disbursements of a single counsel and any outside consultants for the Collateral Agent, in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from or other realization upon any of the Collateral, (iii) the exercise, enforcement or protection of any of the Collateral Agents Rights and Remedies hereunder or (iv) the failure of any Grantor to perform or observe any of the provisions hereof.
(b) Without limiting or duplicating any of their indemnification obligations under the Credit Agreement, the Guaranty or the other Loan Documents, the Grantors shall jointly and severally indemnify the Credit Parties and each Related Party of any of the foregoing Persons (each such Person being called an Indemnitee) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable and documented in reasonable detail fees, charges and disbursements of a single counsel for all Indemnitees taken as a whole in each relevant jurisdiction material to the interests of the Lenders, in each case, selected by the Collateral Agent and solely in the case of an actual conflict of interest between Indemnitees where the Indemnitees affected by such conflict inform the Borrower of such conflict, one additional counsel in each relevant jurisdiction material to the interest of the Lenders to each group of affected Indemnitees taken as a whole) incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Grantor arising out of, in connection with, or as a result of, (i) the preparation, execution, delivery or administration of this Agreement, the Credit Agreement, any other Loan Document or any other agreement or instrument contemplated hereby or thereby or any amendment or waiver with respect hereto or thereto, the performance by the parties hereto of their respective obligations hereunder or thereunder, or the consummation of the transactions contemplated hereby or thereby, or, in the case of the Collateral Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement, the Credit Agreement and the other Loan Documents, or (ii) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by any Grantor, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by any Grantor against an Indemnitee for breach in bad faith of such Indemnitees obligations hereunder or under any other Loan Document, if such Grantor has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.
(c) To the fullest extent permitted by applicable Law, the Grantors shall not assert, and hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, the Credit Agreement, any other Loan Document or any agreement or instrument contemplated hereby, or the transactions contemplated hereby or thereby. No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement, the Credit Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.
(d) Any such amounts payable as provided hereunder shall be additional Secured Obligations secured hereby and by the other Security Documents. All amounts due under this Section 8.06 shall be payable not later than ten (10) Business Days after receipt of an invoice or demand therefor.
(e) The agreements in this Section 8.06 shall survive the resignation of the Collateral Agent, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Secured Obligations.
SECTION 8.07 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.08 Waivers; Amendment.
(a) The rights, remedies, powers, privileges, and discretions of the Collateral Agent hereunder (herein, the Collateral Agents Rights and Remedies) shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by the Collateral Agent in exercising or enforcing any of the Collateral Agents Rights and Remedies shall operate as, or constitute, a waiver thereof. No waiver by the Collateral Agent of any Event of Default or of any Default under any other agreement shall operate as a waiver of any other Event of Default or other Default hereunder or under any other agreement. No single or partial exercise of any of the Collateral Agents Rights or Remedies, and no express or implied agreement or transaction of whatever nature entered into between the Collateral Agent and any Person, at any time, shall preclude the other or further exercise of the Collateral Agents Rights and Remedies. No waiver by the Collateral Agent of any of the Collateral Agents Rights and Remedies on any one occasion shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver. The Collateral Agents Rights and Remedies may be exercised at such time or times and in such order of preference as the Collateral Agent may determine. The Collateral Agents Rights and Remedies may be exercised without resort or regard to any other source of satisfaction of the Secured Obligations. No waiver of any provisions of this Agreement or any other Loan Document or consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Grantor in any case shall entitle such Grantor or any other Grantor to any other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to a written agreement entered into between the Collateral Agent and the Grantor or Grantors with respect to whom such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 11.01 of the Credit Agreement.
SECTION 8.09 WAIVER OF JURY TRIAL. 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 8.09.
SECTION 8.10 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 8.11 Counterparts. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 8.12 Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
SECTION 8.13 Jurisdiction; Waiver of Venue; Consent to Service of Process.
(a) EACH OF THE GRANTORS 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 COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR 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. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE COLLATERAL AGENT, ANY LENDER OR ANY L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY OF THE GRANTORS OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(b) EACH OF THE GRANTORS 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 (A) OF THIS SECTION. 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.
(c) EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 8.01. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
SECTION 8.14 Termination; Release of Collateral.
(a) Any Lien upon any Collateral will be released automatically if the Collateral constitutes property being sold, transferred or disposed of in a Permitted Disposition to a Person that is not a Grantor. Upon at least two (2) Business Days prior written request by the Grantors, the Collateral Agent shall execute such documents as may be necessary to evidence the release of the Liens upon any Collateral described in this Section 8.14(a); provided, however, that (i) the Collateral Agent shall not be required to execute any such document on terms which, in its reasonable opinion, would, under applicable Law, expose the Collateral Agent to liability or entail any adverse consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Secured Obligations or any Liens (other than those expressly being released) upon (or obligations of any Grantor in respect of) all interests retained by any Grantor, including, without limitation, the Proceeds of any sale, all of which shall continue to constitute part of the Collateral.
(b) Except for those provisions which expressly survive the termination thereof, this Agreement and the Security Interest granted herein shall terminate when (i) the Commitments have expired or been terminated, (ii) all of the Secured Obligations have been paid in full in cash or otherwise satisfied (other than any indemnity obligation for unasserted claims that by its terms survives the termination of this Agreement or the Credit Agreement), (iii) all L/C Obligations have been reduced to zero (or fully cash collateralized in a manner reasonably satisfactory to the applicable L/C Issuer and the Administrative Agent), and (iv) the L/C Issuers have no further obligation to issue Letters of Credit under the Credit Agreement, at which time the Collateral Agent shall execute and deliver to the Grantors, at the Grantors expense, all UCC termination statements, releases and similar documents that the Grantors shall reasonably request to evidence such termination; provided, however, that the Credit Agreement, this Agreement, and the Security Interest granted herein shall be reinstated if at any time payment, or any part thereof, of any Secured Obligation is rescinded or must otherwise be restored by any Credit Party upon the bankruptcy or reorganization of any Grantor. Any execution and delivery of termination statements, releases or other documents pursuant to this Section 8.14 shall be without recourse to, or warranty by, the Collateral Agent or any other Credit Party.
SECTION 8.15 Conflict. In the event of a conflict between this Agreement and the Pledge Agreement, the terms of the Pledge Agreement shall control with respect to the Pledged Collateral (as defined in the Pledge Agreement) and the terms of this Agreement shall control with respect to all other Collateral. In the event of a conflict between this Agreement and the Intellectual Property Security Agreement, the terms of the Intellectual Property Security Agreement shall control with respect to the IP Collateral (as defined in the Intellectual Property Security Agreement) and the terms of this Agreement shall control with respect to all other Collateral.
SECTION 8.16 Intercreditor Agreement. Notwithstanding anything herein to the contrary, the Lien and Security Interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict between the terms of the Intercreditor Agreement and the terms of this Agreement, the terms of the Intercreditor Agreement shall govern and control.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.
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BORROWER: | |
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THE CONTAINER STORE, INC. | |
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/s/ Jodi Taylor |
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Jodi Taylor |
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Chief Financial Officer |
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GUARANTORS: | |
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TCS HOLDINGS, INC., | |
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as Holdings | |
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By: |
/s/ Jodi Taylor |
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Jodi Taylor |
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Chief Financial Officer |
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TCS GIFT CARD SERVICES, LLC, | |
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as Subsidiary Guarantor | |
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By: |
/s/ Jodi Taylor |
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Jodi Taylor |
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Chief Financial Officer |
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TCS INSTALLATION SERVICES, LLC, | |
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as Subsidiary Guarantor | |
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By: |
/s/ Jodi Taylor |
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Jodi Taylor |
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Title: |
Chief Financial Officer |
SIGNATURE PAGE
SECURITY AGREEMENTTHE CONTAINER STORE, INC.- ABL
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JPMORGAN CHASE BANK, N.A. | |
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/s/ Andrew Ray |
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Andrew Ray |
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Authorized Officer |
SIGNATURE PAGE
SECURITY AGREEMENTTHE CONTAINER STORE, INC.- ABL
SCHEDULE I
Guarantors
TCS Holdings, Inc.
TCS Gift Card Services, LLC
TCS Installation Services, LLC
SCHEDULE 3.05
Bailees; Warehousemen
None.
SCHEDULE 3.06
Consignments
None.
SCHEDULE 3.07
Commercial Tort Claims
None.
SCHEDULE 3.08
Instruments and Chattel Paper
(i) Promissory Notes:
Promissory Note, dated April 6, 2012, in the original principal amount of $2,267,941.68 made by Elfa International AB (successor in interest to Elfa Group AB) for the benefit of The Container Store, Inc. This note is set to mature on June 30, 2012 and as of February 25, 2012 the remaining principal balance is $409,489.44.
Promissory Note, dated April 6, 2012, in the original principal amount of $712,500 made by Elfa International AB (successor in interest to Elfa Group AB) for the benefit of The Container Store, Inc. This note is set to mature on June 30, 2012 and as of February 25, 2012 the remaining balance is $128,645.81.
(ii) Chattel Paper:
None.
SCHEDULE 3.09
Deposit Accounts, Securities Accounts and Commodity Accounts
* Excluded Account
(z): zero balance account
(b): account used for benefit payments
(c): controlled disbursement account
Store# |
|
Location or |
|
Bank |
|
Bank Acct # |
|
Bank Acct ABA # |
|
Cash/GL |
|
City |
|
State |
|
Store Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19005 |
|
AUS |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Austin |
|
TX |
|
19006 |
|
SAN |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
San Antonio |
|
TX |
|
19007 |
|
HOU |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Houston |
|
TX |
|
19008 |
|
FTW |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Fort Worth |
|
TX |
|
19010 |
|
BUC |
|
Wells Fargo |
|
*4945361673 (z) |
|
121000248 |
|
1098 |
|
Atlanta |
|
GA |
|
19011 |
|
TYC |
|
Wells Fargo |
|
*4945361681 (z) |
|
121000248 |
|
1098 |
|
Vienna |
|
VA |
|
19012 |
|
OAB |
|
JP Morgan Chase Bank, N.A. |
|
*1032382 (z) |
|
71000013 |
|
1055 |
|
Oak Brook |
|
IL |
|
19013 |
|
ROC |
|
Wells Fargo |
|
*4945361699 (z) |
|
121000248 |
|
1098 |
|
Rockville |
|
MD |
|
19014 |
|
SCH |
|
JP Morgan Chase Bank, N.A. |
|
*1032382 (z) |
|
71000013 |
|
1055 |
|
Schaumburg |
|
IL |
|
19015 |
|
NOR |
|
JP Morgan Chase Bank, N.A. |
|
*1032382 (z) |
|
71000013 |
|
1055 |
|
Northbrook |
|
IL |
|
19016 |
|
CSD |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Coppell |
|
TX |
|
19017 |
|
SOC |
|
Wells Fargo |
|
*4945361707 (z) |
|
121000248 |
|
1098 |
|
Costa Mesa |
|
CA |
|
19018 |
|
PKM |
|
JP Morgan Chase Bank, N.A. |
|
*192647848 (z) |
|
102001017 |
|
1065 |
|
Denver |
|
CO |
|
19019 |
|
PER |
|
Wells Fargo |
|
*4945361715 (z) |
|
121000248 |
|
1098 |
|
Atlanta |
|
GA |
|
19020 |
|
CHI |
|
JP Morgan Chase Bank, N.A. |
|
*1032382 (z) |
|
71000013 |
|
1055 |
|
Chicago |
|
IL |
|
19021 |
|
SDG |
|
Wells Fargo |
|
*4945361723 (z) |
|
121000248 |
|
1098 |
|
San Diego |
|
CA |
|
Store# |
|
Location or |
|
Bank |
|
Bank Acct # |
|
Bank Acct ABA # |
|
Cash/GL |
|
City |
|
State |
|
19022 |
|
NPK |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Dallas |
|
TX |
|
19023 |
|
GAL |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Dallas |
|
TX |
|
19024 |
|
MIA |
|
Wells Fargo |
|
*495361731 (z) |
|
121000248 |
|
1098 |
|
Miami |
|
FL |
|
19025 |
|
CHP |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Houston |
|
TX |
|
19026 |
|
WHP |
|
JP Morgan Chase Bank, N.A. |
|
*304179531 (z) |
|
21000021 |
|
1082 |
|
White Plains |
|
NY |
|
19027 |
|
SLK |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Southlake |
|
TX |
|
19028 |
|
COL |
|
JP Morgan Chase Bank, N.A. |
|
*629608787 (z) |
|
44000037 |
|
1090 |
|
Columbus |
|
OH |
|
19029 |
|
WAC |
|
Wells Fargo |
|
*4945361749 (z) |
|
121000248 |
|
1098 |
|
Walnut Creek |
|
CA |
|
19030 |
|
AVA |
|
Wells Fargo |
|
*4945361756 (z) |
|
121000248 |
|
1098 |
|
Arlington |
|
VA |
|
19031 |
|
COM |
|
Wells Fargo |
|
*4945361764 (z) |
|
121000248 |
|
1098 |
|
Corte Madera |
|
CA |
|
19032 |
|
PAR |
|
JP Morgan Chase Bank, N.A. |
|
*304179531 (z) |
|
21000021 |
|
1082 |
|
Paramus |
|
NJ |
|
19033 |
|
SFO |
|
Wells Fargo |
|
*4945361772 (z) |
|
121000248 |
|
1098 |
|
San Francisco |
|
CA |
|
19034 |
|
SJO |
|
Wells Fargo |
|
*4945361780 (z) |
|
121000248 |
|
1098 |
|
San Jose |
|
CA |
|
19035 |
|
6AV |
|
JP Morgan Chase Bank, N.A. |
|
*304179531 (z) |
|
21000021 |
|
1082 |
|
New York |
|
NY |
|
19036 |
|
WDC |
|
Wells Fargo |
|
*4945361798 (z) |
|
121000248 |
|
1098 |
|
Washington |
|
DC |
|
19037 |
|
PAS |
|
Wells Fargo |
|
*4945361806 (z) |
|
121000248 |
|
1098 |
|
Pasadena |
|
CA |
|
19038 |
|
CHH |
|
Wells Fargo |
|
*4945361814 (z) |
|
121000248 |
|
1098 |
|
Chestnut Hill |
|
MA |
|
19039 |
|
NAT |
|
Wells Fargo |
|
*4945361822 (z) |
|
121000248 |
|
1098 |
|
Natick |
|
MA |
|
19040 |
|
POR |
|
Wells Fargo |
|
*4945361830 (z) |
|
121000248 |
|
1098 |
|
Tigard |
|
OR |
|
19041 |
|
BEL |
|
Wells Fargo |
|
*4945361848 (z) |
|
121000248 |
|
1098 |
|
Bellevue |
|
WA |
|
19042 |
|
LEX |
|
JP Morgan Chase Bank, N.A. |
|
*304179531 (z) |
|
21000021 |
|
1082 |
|
New York |
|
NY |
|
19043 |
|
CEN |
|
Wells Fargo |
|
*4945361855 (z) |
|
121000248 |
|
1098 |
|
Los Angeles |
|
CA |
|
19044 |
|
STL |
|
Wells Fargo |
|
*4945361863 (z) |
|
121000248 |
|
1098 |
|
St. Louis |
|
MO |
|
19045 |
|
CCR |
|
JP Morgan Chase Bank, N.A. |
|
*192647848 (z) |
|
102001017 |
|
1065 |
|
Denver |
|
CO |
|
19046 |
|
CHL |
|
Wells Fargo |
|
*4945361871 (z) |
|
121000248 |
|
1098 |
|
Charlotte |
|
NC |
|
Store# |
|
Location or |
|
Bank |
|
Bank Acct # |
|
Bank Acct ABA # |
|
Cash/GL |
|
City |
|
State |
|
19047 |
|
LTR |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Little Rock |
|
AR |
|
19048 |
|
SCT |
|
JP Morgan Chase Bank, N.A. |
|
*192647848 (z) |
|
102001017 |
|
1065 |
|
Scottsdale |
|
AZ |
|
19049 |
|
STN |
|
JP Morgan Chase Bank, N.A. |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Frisco |
|
TX |
|
19051 |
|
MIN |
|
Wells Fargo |
|
*4945361889 (z) |
|
121000248 |
|
1098 |
|
Fairview |
|
TX |
|
19052 |
|
CIN |
|
JP Morgan Chase Bank, N.A. |
|
*629608787 (z) |
|
44000037 |
|
1090 |
|
Cinncinatti |
|
OH |
|
19053 |
|
FLT |
|
JP Morgan Chase Bank, N.A. |
|
*192647848 (z) |
|
102001017 |
|
1065 |
|
Flat Iron |
|
CO |
|
19054 |
|
HAL |
|
Wells Fargo |
|
*4945408763 (z) |
|
121000248 |
|
1098 |
|
Hallandale |
|
FL |
|
19055 |
|
RAL |
|
Wells Fargo |
|
*4947120531 (z) |
|
121000248 |
|
1098 |
|
Raleigh |
|
NC |
|
19056 |
|
IND |
|
JP Morgan Chase Bank, N.A |
|
*1032382 (z) |
|
071000013 |
|
1055 |
|
Indianapolis |
|
IN |
|
19057 |
|
CHR |
|
Wells Fargo |
|
*4948908702 (z) |
|
121000248 |
|
1098 |
|
Charlotte |
|
NC |
|
19058 |
|
NSH |
|
Wells Fargo |
|
*4947417432 (z) |
|
121000248 |
|
1098 |
|
Nashville |
|
TN |
|
19059 |
|
WDL |
|
JP Morgan Chase Bank, N.A |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
The Woodlands |
|
TX |
|
19060 |
|
ATX |
|
JP Morgan Chase Bank, N.A |
|
*1588849875 (z) |
|
111000614 |
|
1075 |
|
Arlington |
|
TX |
|
Main Operating Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCS Master Acct |
|
JP Morgan Chase Bank, N.A. |
|
1588849834 |
|
111000614 |
|
1025 |
|
Dallas |
|
TX |
|
|
|
Cash Disb |
|
JP Morgan Chase Bank, N.A. |
|
*9319960630 (z), (c) |
|
111300880 |
|
1026 |
|
Dallas |
|
TX |
|
|
|
Payroll |
|
JP Morgan Chase Bank, N.A. |
|
*9319960622 (z), (c) |
|
111000614 |
|
1110 |
|
Dallas |
|
TX |
|
|
|
Amex |
|
JP Morgan Chase Bank, N.A. |
|
*645589250 (z) |
|
111000614 |
|
1022 |
|
Dallas |
|
TX |
|
|
|
V/MC |
|
JP Morgan Chase Bank, N.A. |
|
*645589268 (z) |
|
111000614 |
|
1087 |
|
Dallas |
|
TX |
|
|
|
DSCV |
|
JP Morgan Chase Bank, N.A. |
|
*1588849842 (z) |
|
111000614 |
|
1085 |
|
Dallas |
|
TX |
|
|
|
GPA Flex |
|
JP Morgan Chase Bank, N.A. |
|
*638476341 (z), (b) |
|
111000614 |
|
1140 |
|
Dallas |
|
TX |
|
|
|
GPA Health Bene |
|
JP Morgan Chase Bank, N.A. |
|
*638476358 (z), (b) |
|
111000614 |
|
1145 |
|
Dallas |
|
TX |
|
|
|
TCS ACH Wire |
|
JP Morgan Chase Bank, N.A. |
|
*734228026 (z) |
|
111000614 |
|
1027 |
|
Dallas |
|
TX |
|
Store# |
|
Location or |
|
Bank |
|
Bank Acct # |
|
Bank Acct ABA # |
|
Cash/GL |
|
City |
|
State |
|
|
|
Depository Master |
|
JP Morgan Chase Bank, N.A. |
|
734228018 |
|
124001545 |
|
1028 |
|
Dallas |
|
TX |
|
|
|
Depository Master |
|
Wells Fargo |
|
4121764674 |
|
121000248 |
|
1098 |
|
Dallas |
|
TX |
|
|
|
Pcard |
|
Wells Fargo |
|
4000045914 |
|
121000248 |
|
1095 |
|
Dallas |
|
TX |
|
|
|
TCS Gift Card |
|
JP Morgan Chase Bank, N.A. |
|
663001261 |
|
111000614 |
|
1094 |
|
Dallas |
|
TX |
|
|
|
PT Insurance |
|
JP Morgan Chase Bank, N.A. |
|
*826080111 (z), (b) |
|
520101023 |
|
1146 |
|
Dallas |
|
Tx |
|
|
|
TCS GiftCo |
|
JP Morgan Chase Bank, N.A. |
|
918033705 |
|
111000614 |
|
1093 |
|
Dallas |
|
Tx |
|
|
|
TCS Installation Payroll |
|
JP Morgan Chase Bank, N.A. |
|
*428297456 (z), (c) |
|
111000614 |
|
1111 |
|
Dallas |
|
Tx |
|
|
|
TCS Installation Master |
|
JP Morgan Chase Bank, N.A. |
|
428297399 |
|
111000614 |
|
1112 |
|
Dallas |
|
Tx |
|
|
|
SF HRA account |
|
JP Morgan Chase Bank, N.A. |
|
*790198485 (z), (b) |
|
111000614 |
|
1147 |
|
Dallas |
|
Tx |
|
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
|
|
|
DFW (CAP ACCOUNTS) |
|
|
|
|
|
142 488 951 7 |
|
|
|
|
|
6011 0170 1743 658 |
|
|
|
|
|
654467 |
|
|
|
|
|
|
|
5 |
|
AUS |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 497 447 5 |
|
645589250 |
|
1211 |
|
6011 0179 9096 266 |
|
1588849842 |
|
1212 |
|
687897 |
|
645589268 |
|
1210 |
|
1235 |
|
6 |
|
SAN |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 483 815 9 |
|
645589250 |
|
1211 |
|
6011 0170 1743 799 |
|
1588849842 |
|
1212 |
|
688374 |
|
645589268 |
|
1210 |
|
1235 |
|
7 |
|
HOU |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 441 613 9 |
|
645589250 |
|
1211 |
|
6011 0170 1746 727 |
|
1588849842 |
|
1212 |
|
688382 |
|
645589268 |
|
1210 |
|
1235 |
|
8 |
|
FTW |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 558 006 5 |
|
645589250 |
|
1211 |
|
6011 0170 1746 743 |
|
1588849842 |
|
1212 |
|
688390 |
|
645589268 |
|
1210 |
|
1235 |
|
9 |
|
CCK |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 420 958 3 |
|
645589250 |
|
1211 |
|
6011 0170 1746 768 |
|
1588849842 |
|
1212 |
|
688754 |
|
645589268 |
|
1210 |
|
1235 |
|
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
|
10 |
|
BUC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
410 443 271 1 |
|
645589250 |
|
1211 |
|
6011 0170 1746 784 |
|
1588849842 |
|
1212 |
|
688762 |
|
645589268 |
|
1210 |
|
1235 |
|
11 |
|
TYC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
445 446 908 1 |
|
645589250 |
|
1211 |
|
6011 0170 1983 213 |
|
1588849842 |
|
1212 |
|
688796 |
|
645589268 |
|
1210 |
|
1235 |
|
12 |
|
OAB |
|
JP Morgan Chase Bank, N.A. |
|
071000013 |
|
312 470 141 8 |
|
645589250 |
|
1211 |
|
6011 0170 2523 265 |
|
1588849842 |
|
1212 |
|
688804 |
|
645589268 |
|
1210 |
|
1235 |
|
13 |
|
ROC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
219 480 234 4 |
|
645589250 |
|
1211 |
|
6011 0170 2615 517 |
|
1588849842 |
|
1212 |
|
688812 |
|
645589268 |
|
1210 |
|
1235 |
|
14 |
|
SCH |
|
JP Morgan Chase Bank, N.A. |
|
071000013 |
|
312 473 309 8 |
|
645589250 |
|
1211 |
|
6011 0170 2831 676 |
|
1588849842 |
|
1212 |
|
688820 |
|
645589268 |
|
1210 |
|
1235 |
|
15 |
|
NOR |
|
JP Morgan Chase Bank, N.A. |
|
071000013 |
|
312 473 308 0 |
|
645589250 |
|
1211 |
|
6011 0170 2831 684 |
|
1588849842 |
|
1212 |
|
688879 |
|
645589268 |
|
1210 |
|
1235 |
|
16 |
|
CSD |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 473 529 8 |
|
645589250 |
|
1211 |
|
6011 0170 2790 807 |
|
1588849842 |
|
1212 |
|
687905 |
|
645589268 |
|
1210 |
|
|
|
17 |
|
SOC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 519 211 9 |
|
645589250 |
|
1211 |
|
6011 0179 9088 172 |
|
1588849842 |
|
1212 |
|
689042 |
|
645589268 |
|
1210 |
|
1235 |
|
18 |
|
DEN |
|
JP Morgan Chase Bank, N.A. |
|
102001017 |
|
105 472 849 8 |
|
645589250 |
|
1211 |
|
6011 0170 4351 350 |
|
1588849842 |
|
1212 |
|
689059 |
|
645589268 |
|
1210 |
|
1235 |
|
19 |
|
PER |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
410 474 030 3 |
|
645589250 |
|
1211 |
|
6011 0170 4249 265 |
|
1588849842 |
|
1212 |
|
689083 |
|
645589268 |
|
1210 |
|
1235 |
|
20 |
|
CHI |
|
JP Morgan Chase Bank, N.A. |
|
071000013 |
|
312 308 971 6 |
|
645589250 |
|
1211 |
|
6011 0170 4661 485 |
|
1588849842 |
|
1212 |
|
689091 |
|
645589268 |
|
1210 |
|
1235 |
|
21 |
|
SDG |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 346 657 2 |
|
645589250 |
|
1211 |
|
6011 0170 4683 216 |
|
1588849842 |
|
1212 |
|
689109 |
|
645589268 |
|
1210 |
|
1235 |
|
22 |
|
NPK |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 328 125 2 |
|
645589250 |
|
1211 |
|
6011 0170 4845 351 |
|
1588849842 |
|
1212 |
|
689315 |
|
645589268 |
|
1210 |
|
1235 |
|
23 |
|
GAL |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 345 014 7 |
|
645589250 |
|
1211 |
|
6011 0170 5247 946 |
|
1588849842 |
|
1212 |
|
689356 |
|
645589268 |
|
1210 |
|
1235 |
|
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
|
24 |
|
MIA |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
409 557 231 9 |
|
645589250 |
|
1211 |
|
6011 0170 5324 638 |
|
1588849842 |
|
1212 |
|
689364 |
|
645589268 |
|
1210 |
|
1235 |
|
25 |
|
CHP |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 507 785 6 |
|
645589250 |
|
1211 |
|
6011 0173 8494 838 |
|
1588849842 |
|
1212 |
|
689596 |
|
645589268 |
|
1210 |
|
1235 |
|
26 |
|
WHP |
|
JP Morgan Chase Bank, N.A. |
|
021000021 |
|
631 002 047 4 |
|
645589250 |
|
1211 |
|
6011 0170 5001 301 |
|
1588849842 |
|
1212 |
|
689604 |
|
645589268 |
|
1210 |
|
1235 |
|
27 |
|
SLK |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 049 336 3 |
|
645589250 |
|
1211 |
|
6011 0178 5061 068 |
|
1588849842 |
|
1212 |
|
689687 |
|
645589268 |
|
1210 |
|
1235 |
|
28 |
|
COL |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
334 016 213 0 |
|
645589250 |
|
1211 |
|
6011 0171 5478 523 |
|
1588849842 |
|
1212 |
|
689695 |
|
645589268 |
|
1210 |
|
1235 |
|
29 |
|
WAC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 197 740 6 |
|
645589250 |
|
1211 |
|
6011 0177 5854 852 |
|
1588849842 |
|
1212 |
|
689703 |
|
645589268 |
|
1210 |
|
1235 |
|
30 |
|
AVA |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
445 017 742 3 |
|
645589250 |
|
1211 |
|
6011 0177 5854 845 |
|
1588849842 |
|
1212 |
|
689729 |
|
645589268 |
|
1210 |
|
1235 |
|
31 |
|
COM |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 605 014 2 |
|
645589250 |
|
1211 |
|
6011 0170 9933 111 |
|
1588849842 |
|
1212 |
|
689737 |
|
645589268 |
|
1210 |
|
1235 |
|
32 |
|
PAR |
|
JP Morgan Chase Bank, N.A. |
|
021000021 |
|
229 033 605 6 |
|
645589250 |
|
1211 |
|
6011 0170 9955 445 |
|
1588849842 |
|
1212 |
|
689745 |
|
645589268 |
|
1210 |
|
1235 |
|
33 |
|
SFO |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 826 366 9 |
|
645589250 |
|
1211 |
|
6011 0170 9860 330 |
|
1588849842 |
|
1212 |
|
689752 |
|
645589268 |
|
1210 |
|
1235 |
|
34 |
|
SJO |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
504 902 175 1 |
|
645589250 |
|
1211 |
|
6011 0178 5060 342 |
|
1588849842 |
|
1212 |
|
689885 |
|
645589268 |
|
1210 |
|
1235 |
|
35 |
|
6AV |
|
JP Morgan Chase Bank, N.A. |
|
021000021 |
|
631 178 122 3 |
|
645589250 |
|
1211 |
|
6011 0178 5060 359 |
|
1588849842 |
|
1212 |
|
848994 |
|
645589268 |
|
1210 |
|
1235 |
|
36 |
|
WDC |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
408 006 912 3 |
|
645589250 |
|
1211 |
|
6011 0179 9700 362 |
|
1588849842 |
|
1212 |
|
70681 |
|
645589268 |
|
1210 |
|
1235 |
|
37 |
|
PAS |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
104 009 203 3 |
|
645589250 |
|
1211 |
|
6011 0170 1900 373 |
|
1588849842 |
|
1212 |
|
78495 |
|
645589268 |
|
1210 |
|
1235 |
|
38 |
|
CHH |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
220 055 264 4 |
|
645589250 |
|
1211 |
|
6011 0170 1900 381 |
|
1588849842 |
|
1212 |
|
80023 |
|
645589268 |
|
1210 |
|
1235 |
|
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX Cash/GL |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
|
39 |
|
NAT |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
220 063 909 4 |
|
645589250 |
|
1211 |
|
6011 0170 2024 678 |
|
1588849842 |
|
1212 |
|
89535 |
|
645589268 |
|
1210 |
|
1235 |
|
40 |
|
POR |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
536 044 064 8 |
|
645589250 |
|
1211 |
|
6011 0170 2073 477 |
|
1588849842 |
|
1212 |
|
91812 |
|
645589268 |
|
1210 |
|
1235 |
|
41 |
|
BEL |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
546 069 085 2 |
|
645589250 |
|
1211 |
|
6011 0170 2174 101 |
|
1588849842 |
|
1212 |
|
103301 |
|
645589268 |
|
1210 |
|
1235 |
|
42 |
|
LEX |
|
JP Morgan Chase Bank, N.A. |
|
021000021 |
|
631 367 074 7 |
|
645589250 |
|
1211 |
|
6011 0170 2174 085 |
|
1588849842 |
|
1212 |
|
103287 |
|
645589268 |
|
1210 |
|
1235 |
|
43 |
|
CEN |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
104 216 119 0 |
|
645589250 |
|
1211 |
|
6011 0170 2612 258 |
|
1588849842 |
|
1212 |
|
119341 |
|
645589268 |
|
1210 |
|
1235 |
|
45 |
|
CCR |
|
JP Morgan Chase Bank, N.A. |
|
102001017 |
|
1051140010 |
|
645589250 |
|
1211 |
|
6011 0170 1743 658 |
|
1588849842 |
|
1212 |
|
168050 |
|
645589268 |
|
1210 |
|
1235 |
|
899 |
|
WEB |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 008 695 1 |
|
645589250 |
|
1211 |
|
6011 0179 9708 993 |
|
1588849842 |
|
1212 |
|
687913 |
|
645589268 |
|
1210 |
|
|
|
99 |
|
DFW |
|
JP Morgan Chase Bank, N.A. |
|
111000614 |
|
142 488 937 6 |
|
645589250 |
|
1211 |
|
6011 0170 1743 674 |
|
1588849842 |
|
1212 |
|
689877 |
|
645589268 |
|
1210 |
|
|
|
46 |
|
CHL |
|
Wells Fargo |
|
121000248 |
|
229 171 495 4 |
|
645589250 |
|
1211 |
|
6011 0170 5369 781 |
|
1588849842 |
|
1212 |
|
177483 |
|
645589268 |
|
1210 |
|
1235 |
|
47 |
|
LTR |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
103 039 307 8 |
|
645589250 |
|
1211 |
|
6011 0170 5391 512 |
|
1588849842 |
|
1212 |
|
10712 |
|
645589268 |
|
1210 |
|
1235 |
|
48 |
|
SCT |
|
JP Morgan Chase Bank, N.A |
|
102001017 |
|
502 144 950 9 |
|
645589250 |
|
1211 |
|
6011 0170 5440 327 |
|
1588849842 |
|
1212 |
|
15316 |
|
645589268 |
|
1210 |
|
1235 |
|
49 |
|
STN |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
142 897 580 9 |
|
645589250 |
|
1211 |
|
6011 0170 5428 074 |
|
1588849842 |
|
1212 |
|
7185 |
|
645589268 |
|
1210 |
|
1235 |
|
50 |
|
FVW |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
2420241879 |
|
645589250 |
|
1211 |
|
6011 0170 5547 485 |
|
1588849842 |
|
1212 |
|
62871 |
|
645589268 |
|
1210 |
|
1235 |
|
51 |
|
MIN |
|
Wells Fargo |
|
121000248 |
|
322 077 844 3 |
|
645589250 |
|
1211 |
|
6011 0170 5452 249 |
|
1588849842 |
|
1212 |
|
17983 |
|
645589268 |
|
1210 |
|
1235 |
|
52 |
|
CIN |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
334 182 253 4 |
|
645589250 |
|
1211 |
|
6011 0170 5452 231 |
|
1588849842 |
|
1212 |
|
17984 |
|
645589268 |
|
1210 |
|
1235 |
|
53 |
|
FLT |
|
JP Morgan |
|
102001017 |
|
105 143 011 4 |
|
645589250 |
|
1211 |
|
6011 0170 5487 988 |
|
1588849842 |
|
1212 |
|
23695 |
|
6455892 |
|
1210 |
|
1235 |
|
Store# |
|
Location |
|
Bank |
|
Bank Acct |
|
Amex Merch |
|
AMEX Bank |
|
AMEX |
|
Discover Merch # |
|
Discover Bank |
|
Discover |
|
Visa/MC |
|
VMC |
|
VMC |
|
Debit |
|
|
|
|
|
Chase Bank, N.A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68 |
|
|
|
|
|
54 |
|
HAL |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
4099999518 |
|
645589250 |
|
1211 |
|
6011 0170 5540 951 |
|
1588849842 |
|
1212 |
|
59512 |
|
645589268 |
|
1210 |
|
1235 |
|
55 |
|
RAL |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
4321939696 |
|
645589250 |
|
1211 |
|
6011 0170 5560 454 |
|
1588849842 |
|
1212 |
|
68693 |
|
645589268 |
|
1210 |
|
1235 |
|
56 |
|
IND |
|
JP Morgan Chase Bank, N.A |
|
071000013 |
|
313 126 232 1 |
|
645589250 |
|
1211 |
|
6011 0170 5606 695 |
|
1588849842 |
|
1212 |
|
196660 |
|
645589268 |
|
1210 |
|
1235 |
|
57 |
|
CHR |
|
Wells Fargo |
|
121000248 |
|
432 218 922 6 |
|
645589250 |
|
1211 |
|
6011 0170 5606 703 |
|
1588849842 |
|
1212 |
|
196661 |
|
645589268 |
|
1210 |
|
1235 |
|
58 |
|
NSH |
|
Wells Fargo |
|
121000248 |
|
441 164 726 6 |
|
645589250 |
|
1211 |
|
6011 0170 5608 436 |
|
1588849842 |
|
1212 |
|
199225 |
|
645589268 |
|
1210 |
|
1235 |
|
59 |
|
WDL |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
242 160 126 1 |
|
645589250 |
|
1211 |
|
6011 0170 5608 444 |
|
1588849842 |
|
1212 |
|
201248 |
|
645589268 |
|
1210 |
|
1235 |
|
60 |
|
ATX |
|
JP Morgan Chase Bank, N.A |
|
111000614 |
|
242 190 200 8 |
|
645589250 |
|
1211 |
|
6011 0170 5635 249 |
|
1588849842 |
|
1212 |
|
204400 |
|
645589268 |
|
1210 |
|
1235 |
|
SCHEDULE 3.10
Electronic Chattel Paper and Transferable Records
None.
EXHIBIT A
Form of Joinder Agreement
[Name of New Grantor]
[Address of New Grantor]
[Date]
Ladies and Gentlemen:
Reference is made to (i) the ABL Facility Security Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the ABL Facility Security Agreement), by and among The Container Store, Inc., a Texas corporation (the Borrower), each of the Persons listed on Schedule I therein (each such Person, individually, a Guarantor and, collectively, the Guarantors) (the Borrower and the Guarantors are hereinafter referred to, individually, as a Grantor and, collectively, as the Grantors), and JPMorgan Chase Bank, N.A., a national banking association, as collateral agent (in such capacity, the Collateral Agent) for its own benefit and the benefit of the other Credit Parties and (ii) the ABL Facility Pledge Agreement, dated as of April 6, 2012 (as amended, modified, supplemented or restated and in effect from time to time, the Term Facility Pledge Agreement, together with the Term Facility Security Agreement, the Security Agreements), by and among the Borrower, the other Grantors, and the Collateral Agent for its own benefit and the benefit of the other Credit Parties. All capitalized terms used but not defined herein shall have the meanings set forth in the Security Agreements.
This Joinder Agreement supplements the Security Agreements and is delivered by the undersigned, [ ] (the New Grantor), pursuant to Section 4.15 of the ABL Facility Security Agreement. The New Grantor hereby agrees to be bound as a Guarantor and as a Grantor party to the Security Agreements by all of the terms, covenants and conditions set forth in the Security Agreements to the same extent that it would have been bound if it had been a signatory to the Security Agreements on the date of the Security Agreements. Without limiting the generality of the foregoing, the New Grantor hereby grants and pledges to the Collateral Agent, its successors and permitted assigns, for its own benefit and the benefit of the other Credit Parties, as collateral security for the full, prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, the Pledged Collateral, a Lien on and security interest in, all of its right, title and interest in, to and under the Collateral and expressly assumes all obligations and liabilities of a Guarantor and Grantor under the Security Agreements. The New Grantor hereby makes each of the representations and warranties and agrees to each of the covenants applicable to the Grantors contained in the Security Agreements.
Annexed hereto are supplements to each of the schedules to the Security Agreements with respect to the New Grantor. Such supplements shall be deemed to be part of the Security Agreements.
This Joinder Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement.
THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the New Grantor has caused this Joinder Agreement to be executed and delivered by its duly authorized officer as of the date first above written.
|
[NEW GRANTOR] | ||
|
| ||
|
| ||
|
By: |
| |
|
Name: |
| |
|
Title: |
| |
|
| ||
AGREED TO AND ACCEPTED: |
| ||
|
| ||
JPMORGAN CHASE BANK, N.A., |
| ||
as Collateral Agent |
| ||
|
| ||
|
| ||
By: |
|
| |
Name: |
|
| |
Title: |
|
|
[Schedules to the ABL Security Agreement and ABL Pledge Agreement to be attached]
Exhibit 10.16
SEK 312,500,000
REVOLVING CREDIT AND TERM LOAN FACILITY
AGREEMENT
between
ELFA INTERNATIONAL AB
as
Borrower
and
TJUSTBYGDENS SPARBANK AB
as
Bank
dated April 27th, 2009
TABLE OF CONTENTS | ||||
PREAMBLE | ||||
1. |
|
DEFINITIONS |
|
3 |
2. |
|
THE FACILITY |
|
6 |
3. |
|
CONDITIONS FOR UTILISATION, etc. |
|
7 |
4. |
|
UTILISATION REQUESTS, etc. |
|
8 |
5. |
|
MARKET DISRUPTION |
|
9 |
6. |
|
PREPAYMENT AND CANCELLATION |
|
9 |
7. |
|
INTEREST |
|
10 |
8. |
|
THE BORROWERS PAYMENT OBLIGATIONS |
|
10 |
9. |
|
COSTS |
|
11 |
10. |
|
FACILITY FEE AND CREDIT FEE |
|
11 |
11. |
|
REPRESENTATIONS |
|
11 |
12. |
|
UNDERTAKINGS |
|
13 |
13. |
|
EVENTS OF DEFAULT |
|
15 |
14. |
|
CHANGE IN CIRCUMSTANCES AND INCREASED COSTS, etc. |
|
16 |
15. |
|
SET OFF |
|
17 |
16. |
|
ASSIGNMENT |
|
17 |
17. |
|
NOTICES, etc. |
|
18 |
18. |
|
LIMITATION OF THE BANKS LIABILITY |
|
19 |
19. |
|
AMENDMENTS |
|
19 |
20. |
|
TERM |
|
19 |
21. |
|
GOVERNING LAW AND JURISDICTION |
|
19 |
Appendix 1 |
21 | |||
Appendix 2 |
22 |
PREAMBLE
Tjustbygdens Sparbank AB, org no. 516401-0224, hereinafter referred to as the Bank, and Elfa International AB, org no. 556516-2012, hereinafter referred to as the Borrower, have this day due to the executed down-stream merger between the Borrower (surviving entity) and Elfa Group AB, org no. 556568-8875, agreed to replace the Loan Agreement dated August 13th 2007. Thus the Bank and the Borrower have this day entered into the following
REVOLVING CREDIT AND TERM LOAN FACILITY AGREEMENT
1. DEFINITIONS
In this Agreement, the following terms and expressions shall have the meaning set forth below:
Banking Day |
|
means a day (other than a Saturday, Sunday or holiday) on which banks are open for general business in Stockholm for the kind of transactions contemplated by this Agreement; |
|
|
|
Default |
|
means an Event of Default or any event or circumstance specified in Clause 13 which would (with the expiry of a grace period, the giving of notice, the making of any determination under this Agreement or any combination of any of the foregoing) be an Event of Default; |
|
|
|
Equity Ratio |
|
means the Shareholders Equity divided by the Groups total assets provided that generally accepted accounting principles are used. For the purpose of the calculation any write-down (not amortization) of goodwill will be added back to the balance of both equity and goodwill; |
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EBITDA |
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means operating profit before depreciation provided that generally accepted accounting principles are used. For the purpose of the calculation any deduction for non-recurring and unusual charges and expenses will be added back; |
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Event of Default |
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means event or circumstance specified as such in Clause 13; |
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Facility |
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means the revolving credit and term loan facility provided by the Bank pursuant to this Agreement divided into |
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Facility A and Facility B; |
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Facility A |
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means the term loan facility in the aggregate amount of SEK 137,500,000 (originally SEK 175,000,000 in loan agreement dated August 13th 2007) made available under this Agreement as described in Clause 2; |
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Facility A Loan |
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means the loan in the aggregate amount of SEK 137,500,000 made or to be made under Facility A or the principal amount outstanding for the time being of that loan; |
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Facility Amount |
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means SEK 312,500,000 (originally SEK 350,000,000 in loan agreement dated August 13th 2007) or such lower amount as may follow by the provisions of this Agreement; |
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Facility B |
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means the revolving credit facility in the aggregate amount of SEK 175,000,000 made available under this Agreement as described in Clause 2; |
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Facility B Loan |
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means each separate amount of principal disbursed to the Borrower under this Agreement as a Facility B Loan or the principal amount outstanding for the time being of each such loan; |
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Facility Period |
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means unless otherwise prescribed by the provisions of this agreement, the period commencing with the entry into force of this Agreement pursuant to Clause 3.1 up to and including August 30th 2014; |
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Loan |
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means each of the Facility A Loan and any Facility B Loan; |
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Financial Indebtedness |
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means indebtedness relating to: |
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(a) loans that have been raised or credit facilities that have been utilised; |
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(b) issued convertible debentures, debentures, bonds, notes or similar instruments; |
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(c) rental, purchase, or leasing agreements which, according to generally accepted accounting principles, are to be capitalized and regarded as financial leasing; |
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(d) assigned claims, unless such assignments have taken place without the assignee being entitled to make any claims against the assignor; |
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(e) derivatives transactions, however, when the amount of such indebtedness shall be calculated, only the |
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current market value shall be taken into account; |
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(f) counter-guarantees or other payment undertakings relating to guarantees, letters of credit and other similar instruments or documents which have been issued or accepted by a bank or other financial institution; |
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(g) other legal transactions, including futures contracts which, from a commercial perspective, are to be equated with indebtedness; and |
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(h) obligations pursuant to guarantees or indemnity letters obligations which have been issued as security for any indebtedness as referred to in sub clause (a) - (g) above; |
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Group |
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means the Borrower and any of its Subsidiaries from time to time; |
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Interest Determination Day |
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means the day which occurs two Banking Days prior to the commencement of any Interest Period or Loan Period, as the case may be; |
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Interest Period |
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means as regards Facility B Loan seven (7) days; or such other period as agreed between the Bank and the Borrower; |
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Loan Period |
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means as regards each Facility A Loan, the period of 3, 6, or 12 months (or such other period as agreed between the Bank and the Borrower) commencing on the Utilisation Date, provided however that under no circumstances shall the Loan Period for a Facility A Loan expire after the Termination Date for Facility A; |
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Margin |
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means 1,775 percent units; |
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Market Disruption Event |
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means that at or about 11.00 a.m. on an Interest Determination Date for the relevant Interest Period or Loan Period, as the case may be, the Banks cost of obtaining matching deposits in the market would be in excess of STIBOR and the reason for this is not the Banks own credit standing; |
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Net Debt |
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means the sum of interest-bearing debts less cash in hand; |
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Repayment Date |
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means in respect of the Facility A Loan, the Termination Date for the Facility A Loan or any other date that may |
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follow by the provisions of this Agreement and in respect of each Facility B Loan, the last Banking Day in each Interest Period or any other date that may follow by the provisions of this Agreement; |
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Shareholders Equity |
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means the Groups shareholders equity (including minority interest according to Appendix 2 (2)), determined in accordance with generally accepted accounting principles; |
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STIBOR |
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means the interest rate which is published on the SIOR page on the Reuters information system (or through such other information system or on such other page as replaces the aforesaid system or page) and which constitutes the arithmetic mean of the interest rates which, at approximately 11.00 a.m. on the Interest Determination Date in question, are published by banks on the interbank market in Stockholm for a period equivalent to the Interest Period in question; |
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Subsidiary |
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means a legal entity which is affiliated with a company as a subsidiary (Sw. dotterbolag) as described in Chapter 1, 11 § of the Swedish Companies Act (2005:551) (or in such other provision as may replace this provision); |
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Termination Date |
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means |
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(a) in respect of Facility A August 30th 2014; and |
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(b) in respect of Facility B August 30th 2009. If the Borrower complies with the agreed covenants and other general conditions the Facility B will automatically be prolonged by one year on an annual basis; |
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Utilisation Date |
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means, as regards each Loan, the Banking Day agreed with the Borrower on which the Loan shall be disbursed in pursuant to Clause 4.2; |
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Utilisation Request |
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means a notice substantially in the form set out in Appendix 1. |
2. THE FACILITY
2.1 Subject to the terms and conditions of this Agreement the Bank makes available to the Borrower a term loan in the aggregate amount of Facility A to be utilised by the drawing of one loan and a revolving credit facility in an aggregate amount of Facility B to be utilised by the drawing of loans.
Outstanding debt to the Bank assigned to the Loan Agreement dated August 13th 2007 shall be considered outstanding in this agreement.
2.2 The Borrower shall apply all amounts borrowed by it under the Facility towards refinancing existing debt and financing working capital, machinery, equipment, real estate and acquisitions by the Borrower and its Subsidiaries. The Bank is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.
3. CONDITIONS FOR UTILISATION, etc.
3.1 This Agreement shall enter into force upon execution by the parties. However, the Borrower shall not be entitled to deliver a Utilisation Request prior to the Bank having received the following documents:
(a) a certified copy of the current certificate of registration;
(b) a copy of the constitutional documents of the Borrower;
(c) a copy of the board resolution confirming that the Borrower shall enter into this Agreement; and
(d) Pledge agreements concerning agreed securities in form and substance satisfactory to the Bank
(e) a letter of approval from The Container Store Inc., Dallas, USA, concerning this Agreement and concerning necessary changes in the Groups pledges and other securities due to the executed merger between Elfa Group AB and Elfa International AB.
In the event of any change to the information set forth in the document specified under (a) above regarding the authorising of a specified person or persons, on its behalf, to sign and/or despatch all documents and notices to be signed and/or despatched by it under or in connection with this Agreement, the Borrower hereby undertakes to forthwith provide the Bank with a new document evidencing such changes. However, the Bank shall be entitled to rely upon the information contained in the original document until such time as the Bank has received the new document.
3.2 The Banks disbursement of any Loan shall be conditional upon:
(a) no Default has occurred and no circumstances are prevailing which constitute a right of termination for the Bank in accordance with Clauses 6.4, 13 or 14;
(b) the aggregated amount of all Loans, following disbursement of the requested Loan, do not exceed neither the Facility Amount nor, following disbursement of a Facility A Loan, the aggregate amount of all
Facility A Loans does not exceed Facility A amount and nor, following disbursement of a Facility B Loan, the aggregate amount of all Facility B Loans does not exceed Facility B amount;
(c) the terms and conditions set forth in Clause 4 having been met; and
(d) a total of not more than six Loans will be outstanding under Facility B at the same time.
4. UTILISATION REQUESTS, etc.
4.1 The Borrower may utilise the Facility by sending Utilisation Requests by fax to the Bank marked to the attention of its department Företagsavdelningen, fax no. +46 490 815120 not later than 10.00 a.m. three Banking Days prior to the Utilisation Date.
4.2 Each Utilisation Request shall show:
(a) as regards a Loan to be disbursed under Facility A, the amount of the Loan which shall be a minimum amount of SEK 6,250,000 or integral multiples thereof;
(b) the proposed Utilisation Date;
(c) as regards the Facility B Loan, the proposed Interest Period and as regards a Facility A Loan, the proposed Loan Period; and
(d) the account into which the Loan shall be disbursed.
Each Utilisation Request must be signed by the Borrower. The Borrower is responsible for ensuring that the officers of the Borrower who submit Utilisation Requests comply with any limitations on their authority to represent the Borrower.
4.3 Each Utilisation Request shall be confirmed by the Bank sending a confirmation letter setting forth the specific terms and conditions by fax to the Borrower as soon as possible and not later than one Banking Day prior to the Utilisation Date. The Loan shall be governed by this Agreement and the specific terms and conditions contained in the confirmation without reference to this Agreement being required in the confirmation.
4.4 In the event the last day of an Interest Period or a Loan Period falls on a day which is not a Banking Day, the Interest Period or Loan Period, as the case may be, shall be extended to the subsequent Banking Day, provided that such subsequent Banking Day does not fall in a new calendar month, in which case the last day of Interest Period or the Loan Period, as the case may be, shall fall instead on the immediately preceding Banking Day.
4.5 Each Utilisation Request is irrevocable.
5. MARKET DISRUPTION
If a Market Disruption Event occurs for any Interest Period or Loan Period, as the case may be, then the rate of interest for the Interest Period or Loan Period shall be the rate per annum which is the sum of:
(a) the Margin; and
(b) the rate expressed as a percentage rate per annum to be the cost to the Bank of funding the Loan from whatever source it may reasonably select.
6. PREPAYMENT AND CANCELLATION
6.1 The Borrower shall be entitled to prepay a Loan or part thereof, but if in part, by a minimum amount of SEK 6,250,000, prior to the Repayment Date if it gives the Bank not less than fifteen Banking Days prior written notice, provided that the Borrower indemnifies the Bank for any loss (for the avoidance of doubt save for the Margin) during the Loan Period resulting from any contracts where the interest rate has been fixed for that time period. After the Bank has received notice of prepayment of the Loan pursuant to the aforesaid, the Borrower shall be obliged to effect prepayment according to such notice.
6.2 Any amount prepaid under Facility A may not be reborrowed.
6.3 At any time during the Facility Period, the Borrower shall be entitled to cancel, in whole or in part, the undrawn part of the Facility B Amount in minimum amounts of SEK 10,000,000 or if less the unutilised amount of the Facility B Amount, subject to at least 10 days prior written notice to the Bank.
6.4 If The Container Store Inc, Dallas, USA ceases to control the Borrower or any person or group of persons acting in concert gains control of the Borrower;
(a) the Borrower shall promptly notify the Bank upon becoming aware of that event; and
(b) the Bank shall be entitled to give notice of cancellation of its obligations under this Agreement and demand repayment of all Loans provided under this Agreement with accrued interest and other claims against the Borrower resulting from this Agreement, on the date which the Bank determines.
7. INTEREST
7.1 The rate of interest on each Loan for each Interest Period and for each Loan Period, as the case may be, is the percentage rate per annum which is the aggregate of the relevant STIBOR and the Margin.
7.2 Interest will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days. Interest on the Facility B Loan will be calculated for the period from and including the first day in each Interest Period to the last day in such period. The first Interest Period shall start on the Utilisation Date and all other Interest Periods on the last day of its preceding Interest Period. Each Loan Period for a Facility A Loan shall start on the Utilisation Date and end on the Repayment Date.
7.3 Accrued interest on the Facility B Loan shall be paid on the last day of each Interest Period (and, if the Interest Period is longer than six months, on the dates falling at six-monthly intervals after the first day of the Interest Period) and accrued interest on a Facility A Loan shall be paid on each Repayment Date (and if the Loan Period is longer than six months, on the each Banking Day falling at six monthly intervals after the first day of the Loan Period).
8. THE BORROWERS PAYMENT OBLIGATIONS
8.1 The Borrower undertakes to repay the Facility A Loan by 22 equal consecutive quarterly instalments commencing on May 30th 2009 and to pay accrued interest on each Loan in accordance with the provisions of Clause 7.3. Payments shall be made into an account designated by the Bank in such time that the amount is freely available to the Bank not later than 11.00 a.m. on the due date for payment.
8.2 If the Borrower fails to repay a Loan or interest thereon default interest shall accrue on the overdue amount from the due date up to the date of actual payment in full. Default interest shall be determined by the Bank and calculated as the higher of: (a) the interest rate which applied to the Loan in question during the Interest Period or Loan Period, as the case may be; or (b) the total of the Margin and the interest rate at which the Bank is able to refinance itself for the period(s) which the Bank determines, in both cases, with addition of two (2) percentage units.
8.3 In the event of delay in payment of any due amounts pursuant to this Agreement other than those referred to in Clause 8.2 above, the Borrower shall pay default interest on the due amount from and including the due date for payment until full payment is made calculated on the total of the Margin and the interest rate at which the Bank may refinance itself on for period(s) which the Bank determines with addition of two (2) percentage units.
8.4 Interest calculated pursuant to Clauses 8.2 and 8.3 shall be compounded after each refinancing period determined by the Bank.
8.5 Any payment which is due to be made on a day that is not a Banking Day shall be made on the next Banking Day in the same calendar month (if there is one) or the preceding Banking Day (if there is not).
9. COSTS
The Borrower shall indemnify the Bank on demand for any costs and expenses, including internal and external legal fees, in order to prove and enforce the Banks claims against the Borrower or any other person liable for payment thereof.
10. FACILITY FEE AND CREDIT FEE
The Borrower shall pay to the Bank;
(a) an arrangement fee amounting to SEK 1,000,000. The fee is to be paid on the date of signing this Agreement.
(b) a credit fee of 0,50% on unutilized credit at the end of each quarter related to Facility B Loan, starting January 1st 2009, billed in arrears for each quarter.
11. REPRESENTATIONS
11.1 The Borrower represents and warrants to the Bank that as of the date of this Agreement:
(a) It is a company, duly incorporated and validly existing under the law of its jurisdiction of incorporation;
(b) it has full power and authority (corporate and other) to own its properties and other assets, to carry on its business as it is being conducted and to execute and deliver, and to perform all of its obligations under this Agreement;
(c) it has the power to enter into, perform and deliver and has taken all necessary corporate action to authorise the execution, delivery and performance of this Agreement and the transactions contemplated by it;
(d) the obligations expressed to be assumed by it in this Agreement are valid and legally binding obligations;
(e) the entry into, execution, delivery and performance by it of, and the transactions contemplated by, this Agreement do not violate and will not conflict with in any respect any provisions of (a) any law or
regulation or any order or decree of any authority, agency or court binding on it or (b) any mortgage, contract, agreement or other undertaking or instrument to which it is a party or which is binding on it or any of its assets or (c) its constitutional documents;
(f) no Event of Default or Potential Event of Default, (a) has occurred which is continuing or (b) might reasonably be expected to result from the delivery of an Utilisation Request;
(g) all authorisations required in connection with the performance and validity of this Agreement have been obtained and are in full force and effect;
(h) the utilisation of the Facility will not cause any borrowing, guarantee or other financial limits binding on it to be exceeded;
(i) its payment obligations under this Agreement rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally;
(j) no litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which, if adversely determined, might reasonably be expected to have a material adverse effect have on the performance of its obligations under this Agreement and the transactions contemplated thereby have (to the best of its knowledge and belief) been started or threatened against it.
(k) that it shall make all payments to be made by it without any tax deduction, unless a tax deduction is required by law and promptly upon becoming aware that it must make a tax deduction (i) notify the Bank, and (ii) increase the amount due from it to an amount which (after making any tax deduction) leaves an amount equal to the payment which would have been due if no tax deduction had been required;
(l) under the law of its jurisdiction of incorporation it is not necessary that this Agreement be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to this Agreement or the transactions contemplated by this Agreement other than stamp duty in relation to issuance of new mortgage certificates (if any) as may be provided for any related security agreements ; and
(m) no encumbrance exists over all or any of the present or future revenues or assets of the Borrower except as permitted by Clause 12.2.
11.2 The representations made in Clause 11.1 shall be deemed to be made and repeated by the Borrower on each Utilisation Date and on the first date of each Interest Period and each Loan Period, as the case may be, by reference
to the facts and circumstances then subsisting.
12. UNDERTAKINGS
12.1 The Borrower undertakes:
(a) to immediately inform the Bank of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence;
(b) to immediately inform the Bank of major future changes to the Groups business and operations as well as future acquisition or sale of any property which is of material significance;
(c) to immediately inform the Bank should events of material significance for the Groups development occur or should material changes occur to the Groups financial position, profit trend, liquidity or financing situation provided that such events or changes might have a material effect on the Borrowers ability to perform its obligations under this Agreement;
(d) to supply to the Bank as soon as the same become available, but in any event within 150 days after the end of each of its financial years, its audited consolidated financial statements for that financial year;
(e) to supply to the Bank as soon as the same become available, but in any event within 60 days after the end of the first half of each of its financial years, its unaudited consolidated financial statements for that financial half year;
(f) to otherwise on demand provide the Bank with such information concerning the Group which the Bank reasonably requests and which, in the Banks opinion, may be of significance for the Borrowers or the Banks obligations pursuant to this Agreement; however, the Borrower shall only be obliged to provide the Bank with information to the extent that the provision of such information does not violate any contract which the Borrower or any Subsidiary has entered into with any securities exchange or authorised marketplace on which shares in, or securities issued by, the Borrower or any Subsidiary are listed;
(g) to insure its assets and business to the extent and in a manner which is customary for companies of the same or similar operations as the Borrower;
(h) to procure that its Subsidiaries insure their assets and their business to the extent specified in sub clause (g) above;
(i) not to materially change its business operations compared with the manner in which such are presently conducted;
(j) not (without the prior written consent of the Bank, which consent should not be unreasonably withheld) to merge with any other company;
(k) to inform the Bank of any changes and/or plans of changes of the financing of its parent company The Container Store Inc;
(l) not to pledge or create any other security interest over its assets in any cases other than those specified in Clause 12.2 below without the Banks prior written consent (the aforesaid shall not include any retention of title or lien) or assume any guarantee commitment in respect of any third partys payment obligation;
(m) to ensure that its Subsidiaries comply with the provisions of (I) above whereupon the Subsidiary in question shall comply with the obligations applicable to the Borrower;
(n) to ensure that the claims of the Bank against it under this Agreement at all times rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors except for obligations mandatorily preferred by law.
(o) not, without having informed the Bank, dispose of operations or assets except (i) made in the ordinary course of business on an arms length basis, (ii) in exchange for comparable assets, (iii) of obsolete plant or equipment for cash, or (iv) with the prior written consent of the Bank (which consent should not be unreasonably withheld) from a Group company to another Group company;
(p) to quarterly, in writing, within 30 days after end of each quarter, starting May 31st 2009, report to the Bank according to provisions (q) and (r) below and to any current and future covenant;
(q) to ensure that the Borrowers consolidated Equity Ratio always exceeds 35% at the end of each quarter of a year calculated according to Appendix 2; and
(r) to ensure that the consolidated ratio of the Borrowers Net Debt to EBITDA never exceeds 4,0 at the end of each quarter of a year calculated according to Appendix 2 (EBITDA shall be calculated on rolling 12 months, i.e. the latest 12 months);
(s) until April 30th, 2010, (1) to not pay any dividends to its parent, The Container Store Inc., (2) to not make any repayments of principal on intercompany debt owed to its parent, The Container Store, Inc. and (3) to not decrease the price of goods sold to its parent, The
Container Store, inc.;
(t) that after April 30th, 2010, any dividends paid to its parent, The Container Store, Inc., will be based on the Borrowers future net income and on historical intercompany practices as between the Borrower and its parent, The Container Store, Inc.
12.2 However, the Borrowers obligations pursuant to Clauses 12.1 (I) and (m) above shall not include the following pledges or security:
(a) pledges which rise in the Borrowers or its Subsidiaries operations by law;
(b) pledges due to litigation or proceedings involving the Borrower or any Subsidiary before courts of law or arbitral tribunals or due to matters involving the Borrower which are dealt with by courts of law or public authorities;
(c) pledges and other security related to the Borrowers or its Subsidiaries issuance of covered bonds;
(d) pledges and other security in the ordinary course if its business.; and
(e) pledges or other security securing indebtedness of SEK 10,000,000 in aggregate.
12.3 The undertakings in Clause 12.1 remain in force from the date of this Agreement for so long as any amount is outstanding hereunder.
13. EVENTS OF DEFAULT
13.1 The Bank shall be entitled to give notice of cancellation of its obligations under this Agreement and demand repayment of all Loans provided under this Agreement with accrued interest and other claims against the Borrower resulting from this Agreement, on the date which the Bank determines, where any of the following circumstances occur:
(a) the Borrower does not pay on the due date any amount payable pursuant to this Agreement unless its failure to pay is caused by administrative or technical error and payment is made within five (5) Banking Days of the due date;
(b) the Borrower does not comply with any provision of this Agreement (other than that referred to in sub clause (a) above and such failure is not remedied within the earlier of (i) ten (10) days after notice from the Bank and (ii) ten (10) days after the Borrower having become aware of
such failure;
(c) the Borrower or any Subsidiary fails to duly perform, or comply with, any other payment obligations towards the Bank unless its failure to pay is caused by administrative or technical error and payment is made within five (5) Banking Days of the due date;
(d) the Borrower or any Subsidiary fails to make payment on the due date in relation to Financial Indebtedness having an aggregate principal amount more than SEK 5,000,000 other than in relation to the Bank, any of the Borrowers or any Subsidiaries Financial Indebtedness having an aggregate principal amount more than SEK 5,000,000 is declared to be due and payable prior to its specified maturity or any other ground for such declaration has occurred or where any creditor of the Borrower or any Subsidiary cancels a loan commitment or other binding commitment regarding the provision of such Financial Indebtedness;
(e) the Borrower or any Subsidiary has been placed into insolvent liquidation, commenced negotiations for a composition, applied for a company reorganisation order (or has commenced similar proceedings) or has suspended its payments or been placed into liquidation;
(f) any attachment, sequestration, distress or execution affects any asset or assets of a member of the Group; or
(g) any other circumstances exist which give the Bank reasonable grounds to assume that the Borrowers conditions for, and/or possibilities to, make payment or to perform other material obligations towards the Bank pursuant to this Agreement have deteriorated significantly.
13.2 Where repayment is demanded due to cancellation by the Bank pursuant to the aforesaid, the Borrower shall be obliged to indemnify the Bank, on demand, for the reasonable costs and losses which may thereby be incurred by the Bank.
14. CHANGE IN CIRCUMSTANCES AND INCREASED COSTS, etc.
14.1 Unless otherwise set out in the second paragraph of this sub clause 14.1, in the event Swedish or foreign legislation, the actions of Swedish or foreign public authorities, or circumstances which affect the Swedish or a foreign credit or currency market directly or indirectly make it impossible or significantly more expensive for the Bank to provide or maintain any Loan or otherwise fulfil its obligations pursuant to this Agreement, the Bank shall be entitled to terminate this Agreement with immediate effect and demand repayment of any Loan on a date determined by the Bank. The Borrower shall thereupon on demand indemnify the Bank for increased costs up to the date of
repayment of the Loan in question and for such costs which the Bank incurs due to repayment being made other than on the Repayment Date. The Bank hereby undertakes to inform the Borrower without unreasonable delay of such events as referred to in this Clause 14.1.
In the event any of the changed circumstances as referred to in the foregoing paragraph only give rise to an increased cost for the Bank, the Bank shall on request by the Borrower maintain the Loan(s), provided the Borrower indemnifies the Bank for any costs already incurred together with any future costs that the Bank incurs in connection therewith.
14.2 The Borrower shall on demand by the Bank, pay to the Bank the amount of any increased costs incurred by the Bank as a result of the introduction of or any change in any law or regulation (including for the avoidance of doubt any amended rules regarding capital adequacy (such as for example any amended rules due to the implementation of Basel II) or obligations regarding provisions for losses) made after the date of this Agreement which are incurred or suffered by the Bank to the extent that it is attributable to the Bank funding or performing its obligations under this Agreement.
14.3 In the event the Borrower incurs additional expenses pursuant to any of the provisions of this Clause 14, the Borrower shall be entitled to terminate this Agreement immediately provided that all Loans are repaid at the same time together with accrued interest thereon and other documented costs incurred by the Bank in connection with such repayment.
15. SET OFF
15.1 All payments to be made by the Borrower hereunder shall be calculated and be made without any set-off or counterclaim.
15.2 The Borrower authorises the Bank to apply any credit balance to which the Borrower is entitled on any account of the Borrower with the Bank in satisfaction of any sum due and payable from the Borrower to the Bank under this Agreement whether matured or unmatured. For this purpose, the Bank is authorised to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application.
15.3 The Bank shall not be obliged to exercise any right given to it by Clause 15.2.
16. ASSIGNMENT
16.1 The Borrower shall not be entitled to assign its rights or obligations under this Agreement in whole or in part, without the Banks prior written consent.
16.2 The Bank shall be entitled to assign its rights and obligations under this Agreement in whole or in part to another financial institution subject to the
Borrowers prior written consent, which consent shall not be unreasonably withheld. However, the Bank shall at all times be entitled to assign its rights and obligations under this Agreement without the Borrowers consent to another company within the same group as the Bank and to other companies if an Event of Default is continuing. All costs which the Bank may incur due to such assignment shall be borne by the Bank. Prior to a contemplated assignment, the Bank shall notify the Borrower of its intentions without being required to name the prospective assignee and as soon as possible after the execution of the assignment agreement the Bank shall inform the Borrower of the name of the assignee.
17. NOTICES, etc.
17.1 Any communication under, or in connection with, this Agreement, except for Utilisation Requests, shall be in writing and may be given in person, by post or fax to the contacts set out below.
The Borrower:
Elfa International AB
Attention: CEO or CFO
Postal address: 593 87 VÄSTERVIK
Fax number: + 46 490 846 25
The Bank:
Tjustbygdens Sparbank AB
Att: Företagsavdelningen
Visiting address: Kvarngatan 20, Västervik
Postal address: Box 322, 593 24 VÄSTERVIK
Fax number: +46 490 815120
The Borrower and the Bank shall notify each other of any changes of addresses or fax numbers.
17.2 Except as provided in Clause 17.3 below, any communication in connection with this Agreement shall be deemed to be received as follows:
(a) if delivered in person, at the time of delivery;
(b) if delivered by post, three Banking Days after being deposited in the post, postage prepaid, in a correctly addressed envelope; and
(c) if by fax when received in legible form.
17.3 A communication deemed to be received under the foregoing Clause 17.2 but received on a non-Banking Day or on a Banking Day after 16:00 am will only
be deemed to be received on the next Banking Day at the recipient.
18. LIMITATION OF THE BANKS LIABILITY
18.1 The Bank shall not be held responsible for any loss or damage resulting from a Swedish legal enactment, the intervention of a Swedish public authority, an act of war, a strike, blockade, boycott, lockout or any other similar circumstance. The reservation in respect of strikes, blockades, boycotts and lockouts applies even if the Bank itself takes such measures or is the subject of such measures.
18.2 Any loss or damage arising from any other cause shall not be indemnified by the Bank, where the Bank has observed normal care. The Bank cannot be held responsible for any indirect loss or damage.
18.3 Where the Bank is prevented from effecting payments, or, taking other measures due to circumstances as indicated in the first paragraph, the measures in question may be postponed until the obstacle has been removed. Where a payment has been postponed, then the Bank shall, in case it has undertaken to pay interest, pay interest at the rate applicable at maturity.
18.4 Where the Bank, due to circumstances as indicated in the first paragraph, is prevented from receiving payments, the Bank shall be entitled to interest for the period during which the obstacle remains, only under the terms and conditions in force at maturity.
19. AMENDMENTS
In order to be binding, any supplements and amendments to this Agreement must be made in writing.
20. TERM
This Agreement shall remain in force during the Facility Period. Notwithstanding the expiration of the Facility Period, the Borrowers obligations pursuant to this Agreement shall remain in force until fully discharged.
21. GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by Swedish Law. The District Court of Stockholm shall have jurisdiction as the court of first instance to settle any dispute arising out of or in connection with this Agreement.
This Agreement has been executed in two (2) originals of which each party has taken one.
Västervik, April 27th 2009
TJUSTBYGDENS SPARBANK AB |
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ELFA INTERNATIONAL AB |
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/s/ Mats Hasselquist |
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/s/ Per Von Mentzer |
Mats Hasselquist |
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Per Von Mentzer |
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/s/ Thomas Bjorkberger |
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/s/ Jorgen Nilsson |
Thomas Bjorkberger |
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Jorgen Nilsson |
CONFIRMATION
WHEREAS,
(a) Tjustbygdens Sparbank AB has transferred all their rights under a Revolving Credit and Term Loan Facility Agreement dated April 27th, 2009, with an original loan amount of SEK 312,500,000 and with ourselves as borrower, to Swedbank AB.
(b) we, the undersigned, has pledged certain assets (detailed in Annex 1) to Tjustbygdens Sparbank AB as security for our due fulfillment of all obligations under the aforementioned loan agreement as well as for all other claims that Tjustbygdens Sparbank might have against Elfa International AB.
(c) we, the undersigned, has issued a guarantee dated 2009-04-27 for all our subsidiaries ad infinitum obligations towards Tjustbygdens Sparbank AB. (Annex 2)
WE HEREBY CONFIRM
that all assets (detailed in Annex 1) that we have pledged to Tjustbygdens Sparbank AB as well as the guarantee mentioned under (c) above will, after the transfer of all rights under the above mentioned loan agreement, also serve as security for all the obligations towards Swedbank AB under the aforementioned loan agreement as if Swedbank AB had been the initial lender to Elfa International AB.
For the avoidance of doubt it is hereby also confirmed that since Tjustbygdens Sparbank AB have remaining claims on Elfa International AB for which claims the assets (detailed in Annex 1) as well as the guarantee mentioned under (c) above are pledged, Swebank AB and Tjustbygdens Sparbank AB have equal rights to the pledged assets as well as the guarantee mentioned under (c) above, according to their respective claims on Elfa International AB.
Malmö and Västervik, January 24th, 2012
/s/ Per Von Mentzer |
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ELFA INTERNATIONAL AB
TRANSFER CERTIFICATE
ELFA INTERNATIONAL AB (the Borrower), TJUSTBYGDENS SPARBANK AB (the Bank) and SWEDBANK AB ( the New Bank) has on September XX th, 2011 issued this Transfer Certificate in relation to a
SEK 312,500,000 REVOLVING CREDIT AND TREM LOAN FACILITY AGGREMENT DATED APRIL 27th, 2009 (the Agreement)
1. We refer to the Agreement. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2. We refer to Clause 16 (Assignment):
(a) The Bank and the New Bank agree to the Bank transferring to the New Bank all of the Banks commitments, rights and obligations referred to in the Agreement and in Schedule 1.
(b) The transfer date is January xx, 2012.
(c) The New Bank and address, fax number and attention details for notices of the New Bank for the purposes of Clause 17 (Notices, etc.) are set out in Schedule 1.
3. The New Bank expressly acknowledges the limitations on the Banks obligations set out in paragraph of Clause 18 (Limitation of the Banks Liability).
4. This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.
5. Elfa International AB confirms by its signature on this Transfer Certificate i.a. that the Bank shall have the right to receive all future information about the transferred commitments, rights and obligations as if the transfer had not been accomplished.
6. This Transfer Certificate is governed by the laws of Sweden.
SWEDBANK AB (publ) |
TJUSTBYGDENS SPARBANK AB |
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/s/ Per Von Mentzer |
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ELFA INTERNATIONAL AB
CONFIRMATION
WHEREAS,
(a) we, the undersigned, have been informed that Tjustbygdens Sparbank AB has transferred all their rights under a Revolving Credit and Term Loan Facility Agreement dated April 27th, 2009, with an original loan amount of SEK 312,500,000 and with Elfa International AB as borrower to Swedbank AB.
(b) we, the undersigned, have pledged certain assets (detailed in Annex 1) to Tjustbygdens Sparbank AB as security for Elfa International ABs due fulfillment of all obligations under the aforementioned loan agreement as well as for all other claims that Tjustbygdens Sparbank might have against Elfa international AB
WE HEREBY CONFIRM
that all assets and detailed in Annex 1 that we have pledged to Tjustbygdens Sparbank AB will, after the transfer of all rights under the above mentioned loan agreement, also serve as security for all the obligations towards Swedbank AB under the aforementioned loan agreement as if Swedbank AB had been the initial lender to Elfa International AB.
For the avoidance of doubt it is hereby also confirmed that since Tjustbygdens Sparbank AB have remaining claims on Elfa International AB for which claims the assets detailed in Annex 1 are pledged, Swebank AB and Tjustbygdens Sparbank AB have equal rights to the pledged assets, according to their respective claims on Elfa International AB.
Malmö and Västervik, January th, 2012
ELFA SWEDEN AB |
OY ELFA FINLAND |
ELFA LUMI AB |
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LUMINATOR AKTIEBOLAG |
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Exhibit 10.18
OFFICE, WAREHOUSE AND DISTRIBUTION CENTER
LEASE AGREEMENT
THIS OFFICE, WAREHOUSE AND DISTRIBUTION CENTER LEASE AGREEMENT (this Lease) is executed this 8th day of October, 2002, by and between TEXAS DUGAN LIMITED PARTNERSHIP, a Delaware limited partnership (Landlord), and THE CONTAINER STORE, INC., a Texas corporation (Tenant).
WITNESSETH:
ARTICLE 1 - LEASE OF PREMISES
Section 1.01. Basic Lease Provisions and Definitions.
A. Leased Premises: Suite 100 consisting of approximately 653,500 square feet of that certain building consisting of approximately 1,101,500 square feet to be constructed at 500 Freeport Parkway, Coppell, Texas (the Building), which Building shall be situated on that certain tract or parcel of land containing approximately 49.6 acres as more particularly described in Exhibit A-l attached hereto (the Land), located in Freeport North (the Park). The Leased Premises, the Building and the Land are sometimes collectively referred to herein as the Project. The preliminary lease outline drawing of the Leased Premises is set forth on the site plan of the Project attached hereto as Exhibit A (the Site Plan).
B. Rentable Area: approximately 653,500 square feet, consisting of approximately 75,000 square feet of office space and approximately 578,500 square feet of warehouse/distribution space. Rentable Area shall be measured from the middle of common walls and the exterior of (i) outside walls [such exterior not to exceed twelve inches (12) from the interior surface of said outside walls and to exclude pilasters and other exterior architectural features] and (ii) windows, and such measurement shall exclude (a) adjacent corridors, (b) stairwells and elevator shafts, (c) heating and ventilation facilities, (d) telephone and electric rooms and (e) any part of the Common Areas (as hereinafter defined); provided, however, that any item set forth in clauses (b), (c) and (d) above which is within and exclusively serves the Leased Premises shall be included in the Rentable Area of the Leased Premises. The Rentable Area of the Leased Premises shall be determined and certified to Landlord and Tenant in writing (the Square Footage Certificate) by Landlords architect for the Leased Premises and delivered to Tenant on or before the Commencement Date (as hereinafter defined). Within fifteen (15) days of Tenants receipt of the Square Footage Certificate, Tenant shall have the right to have the Rentable Area of the Leased Premises measured by an architect reasonably satisfactory to Landlord (Landlord acknowledges that HLM Architects is satisfactory to Landlord). If the Rentable Area of the Leased Premises, as determined by Tenants architect differs from the amount set forth in the Square Footage Certificate, Tenant shall notify Landlord of such difference in writing. Landlord shall have the right upon written notice to Tenant to dispute said architects determination, in which case Landlords and Tenants architects shall, within ten (10) days after such written notice, mutually identify a third independent, qualified architect licensed in the State of Texas who is professionally competent and experienced in the design and construction of buildings similar to the Building, and shall notify Landlord and Tenant of the name, address and telephone number of such third architect. Within ten (10) days from the selection of the third architect, the three (3) architects shall collectively determine the Rentable Area of the Leased Premises and deliver their written determination thereof to Landlord and Tenant, with the decision of two (2) of the three (3) architects controlling. Each party shall bear the cost of the architect selected by it, and the parties shall equally share the cost of the third architect selected as aforesaid. The determination of the three (3) architects (or 2 out of the 3) shall be final and binding upon Landlord and Tenant as to the Rentable Area of the Leased Premises. If the Rentable Area of the Leased Premises, as set forth in the Square Footage Certificate or as otherwise determined in accordance with the terms herein, differs from the amount set forth in this Section 1.01B, Landlord and Tenant shall enter into an amendment to this Lease, pursuant to which the Minimum Annual Rent (and the Monthly Rental Installments) shall be adjusted, using the rental rates per square foot set forth in Section 1.01D below, to reflect the revised determination of the Rentable Area of the Leased Premises. If Tenant does not elect to have the Leased Premises remeasured in accordance with this Section 1.01B, then the Rentable Area of the Leased Premises shall be deemed to be as set forth in the Square Footage Certificate.
C. Tenants Proportionate Share shall equal a fraction, the numerator of which is the Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.01B above,
and the denominator of which is the total Rentable Area of the Building (if completely constructed, or, if not completely constructed, then as shown on the Site Plan), including the Leased Premises, whether the Building is occupied or not. Currently Landlord estimates the denominator of the fraction to be 1,101,500 square feet as of the date hereof, resulting in an estimated Tenants Proportionate Share of 59.33%.
D. Minimum Annual Rent:
Months 1 2 |
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$0.00 |
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Months 3 26 |
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$2.83 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.01B above |
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Months 27 50 |
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$2.87 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.01B above |
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Months 51 74 |
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$2.96 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.01B above |
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Months 75 98 |
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$3.05 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.01B above |
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Months 99 122 |
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$3.19 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.01B above |
E. Monthly Rental Installments:
Months 1 2 |
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$ |
0.00 |
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Months 3 26 |
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$ |
154,117.08 |
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Months 27 50 |
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$ |
156,295.42 |
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Months 51 74 |
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$ |
161,196.67 |
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Months 75 98 |
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$ |
166,097.92 |
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Months 99 122 |
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$ |
173,722.08 |
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F. Lease Term: One Hundred Twenty-Two (122) months plus, if applicable, the number of additional days required such that the expiration of the term of this Lease, including any extensions thereof, shall not occur during the months of September through and including March (the Holiday Stub). Monthly Rental Installments during the Holiday Stub shall be in the same amounts then in effect prior to the commencement of the Holiday Stub;
G. Commencement Date: Unless otherwise indicated in this Lease, the date of Substantial Completion (as hereinafter defined) of the Work (as hereinafter defined) and Landlords delivery of the Leased Premises to Tenant in accordance with the requirements of Section 2.02F hereof, which date is anticipated to be March 1, 2004 (the Target Commencement Date);
H. Security Deposit: $200,000.00 either in cash or in the form of an Irrevocable Standby Letter of Credit (subject to the provisions set forth in Article 4 hereof);
I. Guarantor(s): None;
J. Broker(s): Cushman & Wakefield of Texas, Inc. representing Tenant;
K. Permitted Use: Warehousing, storage, light assembly, sales at wholesale, sales from mail and internet orders and distribution of merchandise, including, without limitation, organizational products; and general office, administrative and other lawful uses relating to Tenants business;
L. Address for Notices:
Landlord: |
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Texas Dugan Limited Partnership |
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c/o Duke Realty Corporation |
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5495 Belt Line Road, Suite 360 |
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Dallas, Texas 75254 |
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Attn: Property Manager for Freeport Parkway |
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With copy to: |
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Texas Dugan Limited Partnership |
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c/o Duke Realty Corporation |
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3950 Shackleford Road, Suite 300 |
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Duluth, Georgia 30096-8268 |
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Attn: Legal Department (Market Attorney/Texas Market) |
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Tenant: |
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The Container Store, Inc. |
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2000 Valwood Parkway |
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Dallas, Texas 75234-8800 |
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Attn: Chief Financial Officer |
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With copies to: |
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The Container Store, Inc. |
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2000 Valwood Parkway |
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Dallas, Texas 75234-8800 |
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Attn: Vice President of Real Estate |
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and |
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Smith, Robertson, Elliott & Glen, L.L.P. |
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1717 West Sixth Street, Suite 300 |
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Austin, Texas 78703 |
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Attn: Michael L. Robertson, Esq. |
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Address for rental and other payments: | ||
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Texas Dugan Limited Partnership |
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75 Remittance Drive, Suite 1410 |
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Chicago, Illinois 60675-1410 |
M. Exhibits attached hereto:
Exhibit A: |
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Site Plan of the Project |
Exhibit A-l: |
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Legal Description of the Land |
Exhibit A-2: |
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Ruby Road Phase I |
Exhibit A-3: |
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Prohibited Area |
Exhibit A-4: |
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Reserved Parking Area |
Exhibit A-5: |
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Truck Parking and Truck Loading Areas |
Exhibit B: |
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Building and Site Work Description |
Exhibit B-l; |
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Project Schedule |
Exhibit B-2: |
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Building Rendering |
Exhibit C: |
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Letter of Understanding |
Exhibit D: |
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Special Stipulations |
Exhibit E: |
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Additional Surrender Conditions |
Exhibit F: |
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Additional Premises |
Exhibit G: |
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Tenants Signage |
Exhibit H: |
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Landlords Jobsite Rules of Conduct |
Exhibit I: |
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Intentionally Omitted |
Exhibit J: |
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City of Coppell Letter re: Detention Ponds |
Exhibit K: |
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City of Coppell Letter re: Economic Incentives |
Exhibit L: |
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Description of Land to be Purchased by Landlord |
Exhibit M: |
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Form of Letter of Credit |
Section 1.02. Leased Premises. Landlord hereby leases to Tenant and Tenant leases from Landlord, under the terms and conditions herein, the Leased Premises.
ARTICLE 2 - TERM AND POSSESSION
Section 2.01. Term. The term of this Lease (Lease Term) shall be for the period of time set forth in Section 1.01F hereof and shall commence on the Commencement Date set forth in Section 1.01G hereof. The Lease Term may be extended as provided in Exhibit D hereto.
Section 2.02. Construction.
A. Building and Site Work Plans and Specifications. On or before the dates set forth in the Project Schedule (as hereinafter defined) Landlord shall prepare and submit to Tenant plans and specifications (i.e., construction drawings), full civil engineering drawings, site lighting plans (with photometric analysis) and landscaping plans (collectively, the Building and Site Work Plans and Specifications) for the entire Building (excluding the Office Space, as hereinafter defined) and all Common Areas based on the Site Plan, the Building and Site Work Description attached hereto as Exhibit B, and the Rendering attached hereto as Exhibit B-2, covering all work necessary to completely construct and install all improvements to the Building shell and all leasehold improvements within the Building, other than those that are a part of the Office Work (as hereinafter defined), as well as all Common Areas (collectively, the Building and Site Work). Tenant acknowledges that the Building and Site Work Plans and Specifications may be submitted to Tenant in phases. Tenant shall review the Building and Site Work Plans and Specifications or any portions thereof submitted to Tenant and shall provide Landlord with written notice of Tenants approval or requested changes in accordance with the dates set forth in the Project Schedule. To the extent Tenant requests any changes to the Building and Site Work Plans and Specifications which would materially increase or decrease the scope of work or materially alter (i) the Building (such as the height or square footage), (ii) the exterior appearance or basic nature of the Building, or (iii) the Building Systems, as the same are contemplated in Exhibits B and B-2 attached hereto, such changes shall be subject to Landlords prior written approval and in the event they are approved, shall be treated as a Change Order (as hereinafter defined). To the extent any such changes, as approved by Landlord result in a decrease in the cost to construct the Building or Site Work, as contemplated in Exhibits B and B-2 attached hereto, such savings shall be added to the Allowance (as hereinafter defined).
Tenant will have the right to participate in design meetings with Landlord and its design team on a periodic basis. At the conclusion of each design meeting, progress drawings will be distributed to each team member and Tenant for their review and coordination prior to the next design meeting. This process shall be repeated until a final set of drawings are completed. Landlord will provide Tenant with a 50% complete set of Building and Site Work Plans and Specifications and a 100% complete set of Building and Site Work Plans and Specifications for review. Tenant shall have ten (10) business days to review such drawings as shown on the Project Schedule. If Tenant fails to approve or request changes to the 50% complete Building and Site Work Plans and Specifications or the 100% complete Building and Site Work Plans and Specifications received from Landlord by the time periods set forth in the Project Schedule, which time periods shall in no event be less than ten (10) business days after receipt of each such plans by Tenant, then Tenant shall be deemed to have approved the 50% complete or 100% complete set of Building and Site Work Plans and Specifications, as applicable, as submitted by Landlord and the same shall thereupon be final. With Landlords delivery to Tenant of each of such 50% and 100% complete sets of plans, Landlord shall alert Tenant in writing that the delivered set of plans are the 50% set or the 100% set, and advising Tenant that its response is due within ten (10) business days or the set of plans will be deemed approved by Tenant. Landlord shall provide Tenant with written notice two (2) days prior to the deadline for approval of the 100% complete Building and Site Work Plans and Specifications. Notice by email of such deadline shall be deemed effective notice. If Tenant requests any changes to the Building and Site Work Plans and Specifications, Landlord shall make those changes which are reasonably requested by Tenant and shall, by the date set forth in the Project Schedule submit the revised portion(s) of the Building and Site Work Plans and Specifications to Tenant. Such procedure for notice of requested changes and revisions shall be repeated with respect to any revisions to the Building and Site Work Plans and Specifications until same are approved in writing by Landlord and Tenant, in accordance with this Section 2.02A and the Project Schedule, with Landlord and Tenant agreeing to act reasonably, diligently and in good faith with respect thereto. The Building Site Work Plans and Specifications shall be finally approved by Landlord and Tenant by the date set forth in the Project Schedule. Tenants failure to approve the 100% complete Building and Site Work Plans and Specifications after Landlord has made changes reasonably requested by Tenant, and Tenant has reviewed and confirmed such changes have been correctly incorporated therein, shall be deemed to be a Tenant Delay to the extent such delay causes an actual delay in the Target Commencement Date.
Once approved in writing by Landlord and Tenant, the Building and Site Work Plans and Specifications shall not be modified or amended without the prior written consent of Landlord and Tenant, which consent both parties agree to give reasonably, and Landlord shall construct the Building and the Site Work in accordance with the approved Building and Site Work Plans and Specifications. It is agreed by Landlord and Tenant that Landlord shall, at its sole cost and risk, completely construct the Building and the Site Work without any contribution from Tenant except as provided in Section 2.02D below relative to the Landscaping Allowance and the Patio Allowance (as such terms are hereinafter defined) or as otherwise provided in Section 2.02E. Landlord shall at all times in its preparation of the Building and Site Work Plans and Specifications, and any revisions thereto, act reasonably and in good faith. Tenant shall at all times in its review of the Building and Site Work Plans and Specifications, and any revisions thereto, act reasonably and in good faith.
B. Office Plans and Specifications. On or before the date set forth in the Project Schedule, Tenant shall prepare and submit to Landlord a complete set of plans and specifications (i.e., construction drawings) (the Office Plans and Specifications) covering all work (the Office Work) necessary to completely construct and install all interior improvements to the office portion of the Leased Premises (the Office Space) and all leasehold improvements within the Office Space. The Office Plans and Specifications shall be in such detail as Landlord may reasonably require and shall be in compliance with all applicable statutes, ordinances and regulations; provided, however, that Landlords approval of the Office Plans and Specifications shall not be deemed to be a warranty or representation that the Office Plans and Specifications comply with all applicable statutes, ordinances and regulations. Landlord shall review the Office Plans and Specifications and provide Tenant with written notice of its approval or requested changes within the time periods set forth in the Project Schedule. If Landlord requests any changes to the Office Plans and Specifications, Tenant shall make such changes as are reasonably requested by Landlord and shall submit the revised portion of the Office Plans and Specifications to Landlord for its review within the time period set forth in the Project Schedule. This process shall continue until such time that Landlord and Tenant approve the Office Plans and Specifications in accordance with this subsection B and the Project Schedule. Thereafter, any changes to the Office Plans and Specifications shall be subject to Landlords and Tenants prior written approval, which approval shall not be unreasonably withheld. Tenant shall at all times in its preparation of the Office Plans and Specifications, and of any revisions thereto, act reasonably and in good faith. Landlord shall at all times in its review of the Office Plans and Specifications, and any revisions thereto, act reasonably and in good faith.
C. General Contractor for Office Space. Following Landlords and Tenants approval (or deemed approval) of the Office Plans and Specifications, Tenant may, upon written notice to Landlord, require Landlord to solicit competitive bids from at least two (2) mutually agreed upon general contractors, in addition to Landlord or its affiliate, subsidiary or employee, for the Office Work. Tenant shall have the right to provide Landlord with a proposed contractor, and provided such contractor meets with Landlords reasonable approval, such contractor shall have the right to enter a bid. Landlord and Tenant hereby approve Hill & Wilkinson as a contractor which shall have the right to enter a bid relative to the Office Work, and TD Mechanical as a subcontractor which shall have the right to enter a bid to the general contractor for the HVAC and related work that is part of the Office Work. Landlord shall cause the bids to provide a detailed breakdown of all pricing applicable to each component thereof on a line item basis. Landlord and Tenant shall review the bids jointly, and together select the lowest responsive and responsible bid. It is agreed by Landlord and Tenant that in the event that Landlord is the general contractor for the Office Work, Landlord shall, at its sole cost and risk, completely construct such work, without any contribution from Tenant, except as provided in Section 2.02D below. In the event Landlord hires a contractor proposed by Tenant as the general contractor for the Office Work, all work performed by such contractor shall be at Tenants sole cost, except as provided in Section 2.02D below, and risk, and any delay in the Substantial Completion of the Office Work which is caused by Tenants contractor or contractors and which causes an actual delay in the Target Commencement Date shall be a Tenant Delay.
D. Allowances. Following Landlords and Tenants approval (or deemed approval) of the Plans and Specifications (as hereinafter defined) and following the bidding process, Landlord shall deliver to Tenant a statement (the Cost Statement) setting forth in a reasonably detailed, line-item format (i) the cost to construct and install the landscaping (the Landscape Cost), (ii) the cost to construct and install the patio area (the Patio Cost) and, (iii) if Landlord or its affiliate, subsidiary or employee is the general contractor for the Office Work, the cost to construct and install all of the Office Work (the Office Cost). Tenant acknowledges and agrees that the cost to construct and install the Office Work, the landscaping and the patio areas shall be limited to actual, hard construction costs and shall not include any costs associated with overhead, architectural and engineering, review of plans, construction management, shell modifications, general conditions or site supervision, except with regard
to the Office Work as set forth below. Tenant shall pay a fee to Landlord for general conditions and site supervision of five percent (5%) of the Office Cost, which fee shall be added to the Office Cost and applied against the Office Allowance (as hereinafter defined).
Tenant shall be responsible for the cost to construct and install the Office Work, the landscaping and the patio areas only to the extent that the Office Cost, the Landscape Cost and the Patio Cost, taking into account any increases or decreases resulting from any Change Orders (as hereinafter defined), exceed the following amounts, respectively, and as more particularly set forth in Exhibit B attached hereto:
(i) Three Million One Hundred Eighty-Seven Thousand Five Hundred and No/100 Dollars ($3,187,500.00) for the Office Work to be performed in connection with the Office Space within the Leased Premises (the Office Allowance);
(ii) Three Hundred Thousand and No/100 Dollars ($300,000.00) for that portion of the Site Work to be performed in connection with the landscaping (the Landscaping Allowance); and
(iii) Sixty-Five Thousand and No/100 Dollars ($65,000.00) for that portion of the Site Work to be performed in connection with the patio area of the Leased Premises (the Patio Allowance).
In addition to the foregoing Allowances, Landlord shall pay to Tenant, within thirty (30) days of Tenants written request therefor, the following allowances:
(i) Seventy-Five Thousand and No/100 Dollars ($75,000.00) in connection with the below finished ceiling space planning and interior design of the Office Space (the Design Allowance); and
(ii) Seventy-Five Thousand and No/100 Dollars ($75,000.00) for the construction management services provided by Tenants outside consultant in connection with all work performed to the Leased Premises and Building (the Consultant Allowance).
For purposes of this Lease, (i) the Office Allowance, the Landscaping Allowance, the Patio Allowance, the Design Allowance and the Consultant Allowance shall hereinafter be referred to collectively as the Allowance or the Allowances, (ii) the Building and Site Work Plans and Specifications and the Office Plans and Specifications shall sometimes be referred to herein collectively as the Plans and Specifications, and (iii) the Building and Site Work and the Office Work shall be referred to collectively as the Work.
If, following Landlords and Tenants approval (or Tenants deemed approval) of the Plans and Specifications, the Cost Statement shows that the cost to construct and install the Office Work, the landscaping and/or the patio area will exceed the applicable Allowance allocated to such portion of the Work, Tenant shall have the right, by written notice to Landlord delivered within ten (10) business days of Tenants receipt of the Cost Statement, to request a redesign of certain portions of the Office Work, the landscaping and/or the patio area for the purpose of value engineering or otherwise reducing the costs thereof; provided, however, that any delay in the date of Substantial Completion of the Work beyond the Target Commencement Date as a result of Tenants rights to request a redesign as provided herein shall be deemed a Tenant Delay. Upon Landlords receipt of such notice, Landlord and Tenant shall cooperate with each other in good faith and with reasonable diligence to effectuate same so that revised Office Cost, Landscaping Cost and Patio Cost are approved by Landlord and Tenant within thirty (30) days from the date of Tenants delivery of such notice or such earlier date as may be required in order to avoid a delay in construction schedule. After the final costs are approved as aforesaid, if the cost to construct and install the Office Work, the landscaping and/or the patio area exceeds the applicable Allowance, then Tenant shall pay to Landlord, within thirty (30) days following Landlords written request, an amount equal to one-half (1/2) of such excess. Following Substantial Completion of each of the Office Work, the landscaping and/or the patio area, Tenant shall pay to Landlord the remaining difference between the actual cost to construct and install the Office Work, the landscaping and/or the patio area and the applicable Allowance within thirty (30) days of Landlords request therefor. Tenants failure to deliver the payments required in this paragraph shall entitle Landlord to stop the construction and installation of the applicable portion of the Work until such payment is received, and any resulting delay in the Target Commencement Date shall constitute a Tenant Delay hereunder. In addition, all delinquent payments shall accrue interest at the Interest Rate (as hereinafter defined).
If, following Landlords and Tenants approval (or Tenants deemed approval) of the Plans and Specifications, the Cost Statement shows that any Allowance exceeds the actual cost to construct and install the Work applicable to such Allowance, then such excess shall be paid by Landlord to Tenant within thirty (30) days of Substantial Completion of the Work applicable to such Allowance, with interest accruing on such sum after such 30-day period at the Interest Rate until the same is paid.
E. Change Orders. Tenant shall have the right to request in writing that Landlord make changes to the Plans and Specifications from time to time by way of written change orders (each, a Change Order, and collectively, the Change Orders). Any requested Change Order shall be subject to Landlords prior written consent, which consent shall not be unreasonably withheld. Without limiting the foregoing, Tenant acknowledges that Landlord shall be deemed to have reasonably withheld its consent if Tenants requested Change Order is structural in nature, materially alters the Building shell, or increases the scope of work relative to the Building shell from that contemplated in Exhibit B hereto, or if the Change Order will delay Substantial Completion beyond the Target Commencement Date. Provided such Change Order is reasonably acceptable to Landlord, Landlord shall in good faith prepare and submit promptly to Tenant a memorandum setting forth the impact on cost and schedule resulting from said Change Order (the Change Order Memorandum of Agreement). Tenant shall, within three (3) business days following Tenants receipt of the Change Order Memorandum of Agreement, either (i) execute and return the Change Order Memorandum of Agreement to Landlord, or (ii) retract its request for the Change Order. Fifty percent (50%) of any increase in the cost of the Work as evidenced in executed Change Order Memorandum of Agreements (except that relative to the Office Work, the landscape and the patio area, only to the extent such increase causes the total cost of such Work to exceed the applicable Allowance) resulting from Change Orders shall be paid by Tenant to Landlord on a monthly basis within fifteen (15) days after Tenants receipt of an invoice therefor, which invoice shall reflect all cost increases and decreases pursuant to all Change Order Memorandum of Agreements entered into during the prior month, and which invoice shall net out any increases and decreases resulting from such Change Order Memorandum of Agreements, and fifty percent (50%) shall be paid by Tenant following Substantial Completion of the work covered in the Change Orders and within thirty (30) days of Landlords request therefor. Tenants failure to deliver the payments required in this paragraph shall entitle Landlord to stop the construction and installation of the applicable portion of the Work until such payment is received, and any resulting delay in the Target Commencement Date shall constitute a Tenant Delay hereunder. In addition, all delinquent payments shall accrue interest at the Interest Rate. If, subsequent to all Change Order Memorandum of Agreements entered into, Landlords cost to construct the Office Work, the landscaping and the patio area is decreased from that set forth in the Cost Statement, such savings shall be added to the Allowance and paid by Landlord to Tenant as set forth Section 2.02D above.
F. Project Schedule and Permits. The proposed schedule (the Project Schedule) for the construction and installation of the Work is attached hereto as Exhibit B-l. The Work shall be performed by Landlord in a good and workmanlike manner and, subject to Force Majeure (as described in Section 16.04 below) or Tenant Delay (as defined in Section 2.02G) below), in accordance with the Project Schedule. Landlord shall apply for and obtain as expeditiously as possible all governmental, and any applicable non-governmental, permits, licenses, approvals and certificates necessary for the performance of the Work. Landlord does not guarantee or warrant that all necessary permits, licenses, approvals or certificates shall be granted by or available from the applicable governing body. Upon written request therefor, Landlord shall provide Tenant with written notice of Landlords obtaining all such permits, licenses, approvals and certificates and shall provide to Tenant two (2) complete sets of copies of the Plans and Specifications bearing thereon the stamp of approval of the applicable governmental and non-governmental authority(ies). To the extent Tenant has directed Landlord to use its general contractor for the Office Work, then Tenants general contractor (with reasonable cooperation from Landlord) shall be responsible for obtaining any governmental or non-governmental permits, licenses, approvals and certificates necessary for the performance of the Office Work. Notwithstanding anything contained herein to the contrary, in the event Landlord shall not have obtained all necessary permits, licenses, approvals and certificates for the Work in connection with the construction of the Building, excluding the Office Work, and Landlord shall not have actually commenced construction or alteration of the Building (i.e., drilling of piers) by September 1, 2003, subject to Force Majeure and Tenant Delays (the Commencement Termination Date), Tenant may, without liability or further obligation, terminate this Lease upon thirty (30) days prior written notice thereof to Landlord and opportunity to cure, which notice, to be effective, shall be given prior to satisfaction of the foregoing requirements. In the event Tenant fails to notify Landlord of its termination of this Lease prior to satisfaction of the foregoing requirements, this Lease shall continue in full force and effect.
G. Substantial Completion. Possession and Commencement Date. Landlord shall use reasonable speed and diligence to Substantially Complete the Leased Premises on or before the Target
Commencement Date. If Substantial Completion of the Leased Premises is delayed beyond the Target Commencement Date as a result of Tenant Delay, as hereinafter defined, then, for purposes of determining the Commencement Date, Substantial Completion of the Leased Premises shall be deemed to occur on the date that Substantial Completion of the Leased Premises would have occurred but for such Tenant Delay. Notwithstanding any provision in this Lease which could be construed otherwise, in the event Substantial Completion of the Leased Premises has not occurred on or before March 1, 2005, subject to Force Majeure and Tenant Delays, Tenant may, without liability or further obligation, terminate this Lease effective immediately upon written notice thereof to Landlord, which notice, to be effective, shall be given prior to Substantial Completion of the Leased Premises.
For purposes of this Lease, the term Substantial Completion (or any grammatical variation thereof) shall mean such time as (A) Landlord shall certify in writing to Tenant that the Work has been completed in substantial accordance with the Building and Site Work Plans and Specifications subject only to minor punch list items (i.e., such unfinished items as shall not impair Tenants ability to use the Leased Premises in the manner intended by the Lease) to be mutually agreed to and identified by Tenant and Landlord during a joint inspection of the Leased Premises (B) Landlord shall have obtained all necessary governmental approvals and inspections which are Landlords responsibility to obtain, from all applicable governmental authorities in order for Tenant to occupy the Leased Premises, with all systems over which Landlord has control, fully operational, and all utilities described in Exhibit B are available-to service the Leased Premises and are connected to mains and all meters are set and activated, (C) the project architect shall certify in writing to Tenant pursuant to and in accordance with form AIA-G704 as to those same matters in (A) and (B) immediately preceding, (D) Landlord has delivered to Tenant the Square Footage Certificate, and (E) Phase I of Ruby Road, as shown as the crosshatched area on Exhibit A-2, has been completed to the extent that Tenant has vehicular and truck access over such area to the Leased Premises. For purposes of this Lease, the term Tenant Delay shall mean any delay in the completion of the Work, which is attributable to Tenant, and which causes an actual delay in the Target Commencement Date, including, without limitation, (A) Tenants failure to meet any time deadlines specified herein, after any applicable reminder notices, (B) Change Orders which are solely responsible for Landlord not achieving Substantial Completion, (C) the performance of any other work in the Leased Premises by any person, firm or corporation employed by Tenant, or by Tenants general contractor or subcontractors hired by Landlord at the direction of Tenant, or any failure to complete or delay in completion of such work, and (D) any other act or omission of Tenant inconsistent with its rights set forth in this Lease. In no event shall any Tenant Delay occur under clauses (C) and (D) above until Landlord gives Tenant written notice of the event giving rise to such delay and Tenant fails to abate the event within two (2) business days after such notice.
Promptly following Substantial Completion of the Leased Premises, Landlord and Tenant shall execute the Letter of Understanding, substantially in the form attached hereto as Exhibit C and made a part hereof, acknowledging (i) the Commencement Date of this Lease, and (ii) that, except for punchlist items, Tenant has accepted the Leased Premises.
Promptly following Substantial Completion of the Leased Premises, Landlord shall provide to Tenant a CAD file of the Building and Leased Premises for Tenants records and future use; provided that Tenant acknowledges and agrees that any construction, design or other documents prepared by Landlord and its subcontractors and design professionals are instruments of Landlords service. Landlord shall be deemed the owner of any such documents and shall retain all common law, statutory and other rights in such documents, in addition to copyright. The documents are for use solely with respect to this Project. The documents shall not be used by the Tenant or any other person on other projects.
H. Early Access. If and to the extent permitted by applicable laws, rules and ordinances, Tenant shall have the right to enter (i) the warehouse portion of the Leased Premises for sixty (60) days prior to the scheduled date for Substantial Completion of such space in order to install fixtures (such as racking) and otherwise prepare the warehouse portion of the Leased Premises for occupancy (which right shall expressly exclude making any structural modifications) per Exhibit B-l attached hereto and (ii) the Office Space for thirty (30) days prior to the scheduled date for Substantial Completion of such space in order to install fixtures and furnishings and otherwise prepare the Office Space for occupancy. During any entry prior to the Commencement Date (i) Tenant shall comply with all terms and conditions of this Lease other than the obligation to pay any rent, (ii) Tenant shall not unreasonably interfere with Landlords completion of the Work, (iii) Tenant shall cause its personnel and contractors to comply with the terms and conditions of Landlords jobsite rules of conduct attached hereto as Exhibit H, and (iv) Tenant shall not begin operation of its business. Tenant acknowledges that Tenant shall be responsible for obtaining all applicable permits and inspections (e.g., racking permits and fire inspections) relating to any such entry by Tenant.
I. Warranty. Landlord hereby warrants for a period of one (1) year from the Commencement Date, that the Work, and all materials and equipment furnished by Landlords contractors in the completion of the Work, will be of good quality and workmanship, new and free from defects not inherent in the quality required or permitted hereunder. This warranty shall exclude damages caused by Tenant, its agents, contractors, employees and invitees, improper or insufficient maintenance to the extent same is the responsibility of Tenant, improper operation, or normal wear and tear under normal usage. In addition, the foregoing warranty covers all materials, labor and equipment for repairs but does not cover consequential damages, such as lost profits or opportunity, incurred by the Tenant. In addition to the foregoing, Landlord shall provide Tenant with copies of all warranties and guarantees applicable to the Work, within thirty (30) days of receipt thereof [but no later than one (1) year after the Commencement Date], including, without limitation, the following: (i) roof - 10-year manufacturers no dollar limit and 20-year manufacturers material warranty, (ii) caulking - 10-year interior and 10-year exterior warranty on material, (iii) glass and glazing - includes a 2-year contractor warranty, a 5-year manufacturers warranty on aluminum finish and a 10-year manufacturers warranty on insulated glass, (iv) paint - 5-year manufacturers warranty on acrylic exterior paint, (v) HVAC - 5-year warranty on compressors, and (vi) 5-year warranty on elevators and escalators, with the cost differential between a 1-year and 5-year elevator and escalator warranty to be deducted from Tenants Office Allowance. During the Lease Term, Landlord shall promptly enforce for the benefit of Tenant all warranties and guarantees relating to the Work and any and all systems contained therein, including, without limitation, the foregoing specified warranties. Landlord shall assign, to the extent assignable, all warranties related to any components of the Work or any systems serving the Leased Premises that Tenant is required to maintain under the terms of this Lease and to the extent such warranties are not assignable, Landlord will enforce such warranties on behalf of Tenant. Tenant shall not take any action that will invalidate any of the foregoing warranties or guarantees and shall provide Landlord with written notice of all warranty claims. Tenant will notify Landlord promptly upon discovery of any potential problems that may be covered under the foregoing warranties. Without limiting Landlords duty to perform repairs under any warranties contained herein, the extent and performance of any repairs required under the foregoing warranties will be mutually agreed to between Landlord and Tenant so as to minimize the disruption to Tenants business operations.
Section 2.03. Surrender of the Leased Premises. Upon the expiration or earlier termination of this Lease, Tenant shall immediately surrender the Leased Premises to Landlord in broom-clean condition, in good condition and repair and in accordance with the surrender conditions listed on the Exhibit E attached hereto, reasonable wear and tear and casualty excepted. Tenant shall also remove its personal property, trade fixtures, and any of Tenants alterations designated by Landlord pursuant to Section 7.03 hereof to be so removed, and promptly repair any damage caused by such removal, and restore the Leased Premises to the condition existing prior to the installation of such items. If Tenant fails to do so, Landlord may restore the Leased Premises to such condition at Tenants expense, Landlord may cause all of said property to be removed at Tenants expense, and Tenant hereby agrees to pay all the costs and expenses thereby reasonably incurred. All Tenant property which is not removed within ten (10) days following Landlords written demand therefor shall be conclusively deemed to have been abandoned by Tenant, and Landlord shall be entitled to dispose of such property at Tenants cost without thereby incurring any liability to Tenant. The provisions of this Section 2.03 shall survive the expiration or other termination of this Lease.
Section 2.04. Holding Over. If Tenant retains possession of the Leased Premises after the expiration or earlier termination of this Lease, Tenant shall become a tenant from month to month at One Hundred Thirty Five percent (135%) of the Monthly Rental Installment then in effect at the expiration or earlier termination of this Lease, and otherwise upon the terms, covenants and conditions herein specified, so far as applicable. Acceptance by Landlord of rent after such expiration or earlier termination shall not result in a renewal of this Lease, and Tenant shall vacate and surrender the Leased Premises to Landlord upon Tenant being given thirty (30) days prior written notice from Landlord to vacate, whether or not said notice is given on the rent paying date. Tenant shall also have right to terminate such month to month tenancy upon thirty (30) days prior written notice to Landlord. This Section 2.04 shall in no way constitute a consent by Landlord to any holding over by Tenant upon the expiration or earlier termination of this Lease, nor limit Landlords remedies in such event.
ARTICLE 3 - RENT
Section 3.01. Base Rent. Tenant shall pay to Landlord the Minimum Annual Rent in the Monthly Rental Installments, in advance, without demand, and without abatement, deduction or offset, except as specifically provided herein, beginning on the Commencement Date and on or before the first day of each
and every calendar month thereafter during the Lease Term. The Monthly Rental Installment for partial calendar months shall be prorated.
Section 3.02. Additional Rent.
A. Any amount required to be paid by Tenant hereunder (in addition to Minimum Annual Rent) and any charges or expenses incurred by Landlord on behalf of Tenant pursuant to the terms of this Lease shall be considered Additional Rent payable in the same manner and upon the same terms and conditions as the Minimum Annual Rent reserved hereunder except as set forth herein to the contrary. Any failure on the part of Tenant to pay such Additional Rent when and as the same shall become due shall entitle Landlord to the remedies available to it for non-payment of Minimum Annual Rent.
B. In addition to the Minimum Annual Rent, Tenant shall pay to Landlord for each calendar year during the Lease Term, as Additional Rent, Tenants Proportionate Share of all costs and expenses incurred by Landlord during the Lease Term for Real Estate Taxes (as hereinafter defined), Insurance Premiums (as hereinafter defined) and Operating Expenses (as hereinafter defined) for the Building and Common Areas within the Project.
C. For purposes of this Lease, Operating Expenses shall mean all of Landlords reasonable expenses for operation, repair, replacement, and maintenance to keep the Building and Common Areas in good order, condition and repair pursuant to Section 7.02B hereof, together with an annual management or administrative fee in the amount of two percent (2%) of Landlords annual gross rental income from the Building. The Operating Expenses shall include, but not be limited to, utilities serving the Common Areas, insurance deductibles actually paid by Landlord as a result of a casualty claim, but in no event exceeding $25,000 per occurrence; stormwater discharge, license, permit, inspection and other fees, except as otherwise set forth below; fees and assessments imposed by any covenants or owners association in effect as of the effective date hereof (without amendments that would unreasonably increase such fees and assessments); security services; and maintenance and repair of the driveways, parking areas (including snow removal), exterior lighting, landscaped areas, walkways, curbs, drainage strips, storm conveyance systems and sewer lines, exterior walls, roof repairs and gutters. The cost of any Operating Expenses which are of a capital nature shall be amortized over the useful life of such improvement (under generally accepted accounting principles), and only the annual amortized portion shall be included in Operating Expenses. For purposes of this Lease, any improvements performed by Landlord or expenditures made by Landlord in excess of $5,000.00 shall be deemed to be of a capital nature and the costs thereof shall be amortized as set forth above.
Operating Expenses shall exclude expenses due to: (i) intentionally omitted; (ii) intentionally omitted; (iii) painting, redecorating or other work that Landlord performs for any other tenant or prospective tenant of the Building; (iv) repairs or other work (including rebuilding) occasioned by fire, windstorm or other casualty in excess of deductibles not to exceed $25,000 per occurrence or by condemnation; (v) any costs that are separately charged to and payable by tenants or for which Landlord is compensated by insurance proceeds or warranties; (vi) leasing commissions and expenses of procuring tenants, including lease concessions and lease take-over obligations; (vii) depreciation; (viii) interest on and amortization of debt; (ix) taxes of any nature, including Real Estate Taxes and assessments (payment of which is specifically addressed in Section 3.02B above) and interest and penalties for late payment of taxes; (x) rent payable under any lease to which this Lease is subject; (xi) supervisory personnel or property managers , whether on-site or off-site; (xii) costs and expenses of enforcing leases against tenants, including legal fees; (xiii) managing agents commissions, fees, or other similar compensation howsoever characterized other than as expressly provided herein; (xiv) all administration costs, including, without limitation, personnel, office expenses, and supplies, other than as expressly provided herein; (xv) expenses resulting from any violation by Landlord of the terms of any lease of space in the Building or of any ground or underlying lease or any mortgage; (xvi) the repair of any part of the Common Areas that was inadequately designed or defectively constructed; (xvii) intentionally omitted; (xviii) insurance (payment of which is specifically addressed in Section 3.02B above); (xix) payments of deductible amounts under insurance policies, except as specifically provided above; (xx) expenses for vacant or vacated space, including utility, security and renovating costs for such space; (xxi) all costs and expenses associated with any environmental clean-up work of Hazardous Materials existing on the Project prior to the Commencement Date of the Lease or occurring thereafter as a result of the actions of Landlord, its agents, employees or contractors, or any third parties to the extent Landlord has recovered such costs from third parties (Landlord agrees to diligently pursue such recovery); (xxii) any costs and expenses associated with Landlords compliance with Legal Requirements pursuant to Section 7.04 hereof, except to the extent compliance is required because of
amendments, changes, or modifications to the Legal Requirements which become effective after the date of this Lease (subject to being amortized as a capital item as set forth above); (xxiii) seasonal/holiday display items; (xxiv) Landlords profit, administrative and overhead costs (including, but not limited to: office space, equipment and utilities whether on-site or off-site; legal, accounting or administrative services; and Landlords personnel), other than expressly provided herein, (xxv) stormwater discharge, license, permit, inspection and other fees associated with the initial construction of the Building or the Common Areas; and (xxvi) replacement costs for the foundation, exterior walls, structural frame and roof of the Building, and for driveways and parking areas.
D. For purposes of this Lease, Insurance Premiums shall mean and refer to the insurance premiums paid by Landlord for fire and extended coverage insurance on the Building and liability insurance coverage on the Common Areas, together with such other insurance coverages, including, but not limited to, rent interruption insurance, as are from time to time obtained by Landlord and consistent with similar office/warehouse properties in the Dallas/Ft. Worth area.
E. (i) For purposes of this Lease, Real Estate Taxes shall include any form of real estate tax or assessment or service payments in lieu thereof, and any license fee, commercial rental tax, improvement bond or other similar charge or tax imposed by any governmental authority against the owners of real property, together with the reasonable costs and expenses of contesting the validity or amount of Real Estate Taxes. Additionally, Tenant shall pay, prior to delinquency, all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all personal property of Tenant contained in the Leased Premises. Landlord estimates the Real Estate Taxes relating to the Building and the Land for the first (1st) Lease year will be Seventy Cents ($.70) per square foot of Rentable Area. Nothing contained in this Lease, however, shall be deemed or construed to include within Real Estate Taxes: (a) any transfer, documentary or stamp tax; (b) any tax upon the income, profits or business of Landlord; (c) any personal property taxes, payroll taxes, capital levy, or franchise taxes or inheritance or estate taxes, even though such taxes may become a lien against the Leased Premises or the Building; or (d) any taxes, assessments, fees, improvement bonds or other similar change imposed by any governmental authority in connection with the initial construction of the Building or Common Areas. Landlord agrees to promptly pay when they are due all Real Estate Taxes relating to the Building and the Land, except as provided in Section 3.02B above.
(ii) If any general or special assessment is assessed against the Building and/or the Land, Landlord shall elect to pay the assessment in installments over the longest period of time allowed by applicable law, and only those installments (or partial installments) attributable to the term of this Lease shall be considered in determining Tenants tax liability for such assessment. Notwithstanding any provision of this Lease to the contrary, Landlord (and not Tenant) shall be obligated to pay any assessment for special improvements heretofore installed or installed in connection with the initial development of the Building and/or the Leased Premises, such as the construction, alteration or widening of the exterior roads, including, without limitation, Ruby Road and the Freeport Parkway extension, and the installation and/or hook up to sewer and sewer lines, sanitary and storm drainage systems and other utility lines and systems (whether public or private).
(iii) Tenant shall receive, during and subsequent to the term of this Lease, Tenants Proportionate Share of any Real Estate Tax refunds or rebates paid to Landlord and attributable to the term of this Lease, which amount shall be credited to Minimum Monthly Rent or refunded to Tenant if such refund is received after the last year of the Lease. This provision shall survive the expiration or earlier termination of this Lease.
(v) Tenant may, within the respective times and in the manner prescribed by law for such purposes, in its own name and behalf or, if necessary or appropriate in order to perfect such petition, in the name and on behalf of Landlord (except as otherwise set forth herein), petition for reduction of the assessed valuation of the Building and the Land, claim a refund of real estate taxes or assessments or otherwise challenge the amount, validity or applicability of any real estate tax or assessment pertaining to the Leased Premises (a Tax Protest); provided that (a) Tenant shall continue to pay their Proportionate Share of Real Estate Taxes, as required under the Lease, and (b) no portion of the Leased Premises or any rentals payable hereunder or Landlords title or interest herein would be in any danger of being sold, forfeited, interrupted or lost as a result of such Tax Protest. Tenant shall prosecute any Tax Protest with due diligence and continuity. Tenant shall provide Landlord with copies of any application, petition or other pleading filed in connection with any Tax Protest before filing. Landlord may join with Tenant in making any such application, petition or other pleading, retain co-counsel, attend hearings, present evidence and arguments, and generally participate in the conduct of the Tax Protest. If and to the extent that Landlord is requested to do so by Tenant, Landlord agrees to cooperate with Tenant in good faith in connection with any Tax Protest undertaken by Tenant, provided Tenant promptly reimburses Landlord for
any out-of-pocket expense in connection therewith. Subject to Landlords right to reimbursement as set forth below, Tenant shall be entitled to receive and retain any refund of real estate taxes or assessments obtained by Tenant, to the extent such tax or assessment was paid by Tenant under this Section 3.02E. Nothing contained in this Section 3.02E(iv) shall limit or restrict Landlords right to undertake any Tax Protest with respect to the Leased Premises. To the extent Landlord obtains any reduction in or refund of real estate taxes or assessments, Tenant shall pay to Landlord its Proportionate Share of Landlords costs of such Tax Protest as Additional Rent within thirty (30) days of Tenants receipt of Landlords invoice therefor, but Landlord shall not be entitled to reimbursement by Tenant for the costs of such Tax Protest in excess of any reduction and/or refund of such real estate taxes or assessments so obtained.
In the event Tenant undertakes or files any Tax Protest in the name of Landlord, Tenant shall promptly provide Landlord written notice thereof, and Tenant shall indemnify Landlord and hold Landlord harmless against and from any and all costs, attorneys fees, expenses, liabilities or claims arising in connection with Tenants Tax Protest. Tenant shall give Landlord five (5) days advance written notice of any such use of Landlords name.
Landlord agrees to provide to Tenant a copy of any tax assessment, tax bill, tax statement or other tax invoice within twenty (20) days of its receipt of the same.
Section 3.03. Payment of Additional Rent.
A. Landlord shall estimate the total amount of Operating Expenses and Insurance Premiums and Tenants Proportionate Share thereof to be paid by Tenant during each calendar year of the Lease Term, pro-rated for any partial years. Commencing on the Commencement Date, Tenant shall pay to Landlord each month, at the same time the Monthly Rental Installment is due, an amount equal to one-twelfth (1/12) of the estimated Tenants Proportionate Share of Operating Expenses for such year. Within one hundred twenty (120) days after the end of each calendar year, Landlord shall submit to Tenant a reasonably detailed statement of the actual amount of such Operating Expenses and the nature and amount of each component thereof, and within thirty (30) days after receipt of such statement, Tenant shall pay any deficiency between the actual amount owed and the estimates paid during such calendar year. In the event of overpayment, Landlord shall credit the amount of such overpayment toward the next installments of Minimum Rent or refunded to Tenant if such overpayment occurs in the last year of the Lease. This provision shall survive the expiration or earlier termination of this Lease.
B. Landlord shall estimate the total amount of Real Estate Taxes and Tenants Proportionate Share thereof to be paid by Tenant during each calendar year of the Lease Term, pro-rated for any partial years. Tenant shall pay to Landlord each quarter, upon receipt of an invoice therefore, an amount equal to one-fourth (1/4) of the estimated Tenants Proportionate Share of Real Estate Taxes for such year. Within one hundred twenty (120) days after the end of each calendar year, Landlord shall submit to Tenant a copy of the tax bill and a copy of Landlords computations of the actual amount of Real Estate Taxes owed by Tenant, and within thirty (30) days after receipt of such statement, Tenant shall pay any deficiency between the actual amount owed and the estimates paid during such calendar year. In the event of overpayment, Landlord shall credit the amount of such overpayment toward the next installments of Minimum Rent or refunded to Tenant if such overpayment occurs in the last year of the Lease. This provision shall survive the expiration or earlier termination of this Lease.
C. Landlord shall keep good and accurate books and records in accordance with generally accepted accounting principles concerning the operation, maintenance and repair of the Common Areas and the Real Estate Tax and Insurance Premium payments, and Tenant and its agents shall have the right, within six (6) months after Tenants receipt of Landlords statement of Operating Expenses and upon fifteen (15) days prior written notice to Landlord, to audit, inspect and copy such books and records. In the event Tenants review of the statement of Operating Expenses or audit thereof reveals any inaccuracies by Landlord, then Tenant shall also have the right to review and/or audit the books and records for the Operating Expenses for the two (2) years prior to the current year. If any statement of Operating Expenses previously furnished Tenant shall reflect greater than one hundred five percent (105%) of the actual Operating Expenses shown by such audit, Landlord shall immediately pay the reasonable actual cost of such audit for the period audited, not to exceed One Thousand and No/100 Dollars ($1,000.00). If Landlord and Tenant agree that Landlords calculation of Tenants Proportionate Share of Operating Expenses for the inspected calendar year was incorrect, the parties shall enter into a written agreement confirming such error and then, and only then, Tenant shall be entitled to a credit against future Minimum Annual Rent for said overpayment (or a refund of any overpayment if the Lease Term has expired) or Tenant shall pay to Landlord the amount of any underpayment, as the case
may be. Tenant shall use reasonable efforts to keep all of the information obtained through Tenants inspection with respect to financial matters (including, without limitation, costs, expenses and income) and any other matters pertaining to Landlord, the Leased Premises, the Building and/or the Park as well as any compromise, settlement or adjustment reached between Landlord and Tenant relative to the results of the inspection in strict confidence and Tenant shall cause its independent professionals and any of its officers, agents or employees to be similarly bound. The obligations of Tenant in the preceding sentence shall survive the expiration or earlier termination of the Lease. Tenant may conduct such review by its own staff or independent consultants or may use a qualified independent certified public accountant designated by Tenant to aid Tenant in conducting the audit; provided that in no event shall Tenant use any contingent fee-based auditor or consultant.
Section 3.04. Late Charges. Tenant acknowledges that Landlord shall incur certain additional unanticipated administrative and legal costs and expenses if Tenant fails to timely pay any payment required hereunder. Therefore, in addition to the other remedies available to Landlord hereunder or at law, if any payment required to be paid by Tenant to Landlord hereunder shall become overdue after notice and opportunity to cure as provided in Section 13.01A hereof, such unpaid amount shall bear interest from the due date thereof to the date of payment equal to the lesser of (i) the prime rate (as reported in the Wall Street Journal) of interest (Prime Rate) plus five percent (5%) per annum or (ii) the applicable maximum lawful rate of interest (the Interest Rate).
Section 3.05. Nature of Rent. Landlord and Tenant agree that any base rent, percentage rent, if any, and all additional rent paid to Landlord under this Lease (collectively referred to in this Section 3.05 as Rent) shall qualify as rents from real property within me meaning of Section 512(b)(3) of the Internal Revenue Code of 1986, as amended (the Code) and the U.S. Department of Treasury Regulations promulgated thereunder (the Regulations). In the event that Landlord, in its sole discretion, determines that there is any risk that all or part of any Rent shall not qualify as rents from real property for me purposes of Section 512(b)(3) of the Code and the Regulations promulgated thereunder, Tenant agrees (i) to cooperate with Landlord to restructure this Lease so as to cause all Rent to qualify as rents from real property, and (ii) to permit an assignment of this Lease, provided, however, that any adjustments required pursuant to this Section 3.05 shall be made so as to produce the equivalent Rent (in economic terms) payable prior to such adjustment.
ARTICLE 4 - SECURITY DEPOSIT
Tenant shall, upon execution and delivery of this Lease, deposit with Landlord a cash security deposit in the amount of Two Hundred Thousand and 00/100 Dollars ($200,000.00) (the Security Deposit). Tenant shall have the option at any time to provide to Landlord, from a bank reasonably acceptable to Landlord, an irrevocable unconditional letter of credit in the form attached hereto as Exhibit M and incorporated herein by this reference or such other form as may be reasonably acceptable to Landlord. The letter of credit shall be in the amount of Two Hundred Thousand and 00/100 Dollars ($200,000.00) (the Letter of Credit) and shall thereafter constitute the Security Deposit for the full and faithful performance by Tenant of all of the terms, conditions and covenants contained in the Lease on the part of the Tenant to be performed, including but not limited to the payment of rent. In the event the Letter of Credit is delivered as a Security Deposit pursuant to this Article 4, then, upon receipt by Landlord of a Letter of Credit reasonably acceptable to Landlord, Landlord shall promptly return to Tenant the cash Security Deposit.
From and after execution of this Lease, if Tenant is in default at any time during the Lease Term (after notice from Landlord and the expiration of any applicable grace, notice or cure periods), then Landlord may, but shall be under no obligation to, from time to time and without prejudice to any other right or remedies, draw upon such Security Deposit to the extent necessary to pay any such amount due Landlord under this Lease as a result of such uncured default, to cure any such breach or to compensate Landlord for its damages actually incurred by reason of such breach and for no other purpose.
In the event that Landlord applies the Security Deposit or a portion thereof as provided in this Section, Tenant shall immediately upon notice from Landlord of such application restore the Security Deposit to its original amount, it being the intent of the parties that the Security Deposit to be held by Landlord always be the amount stated herein. It is expressly understood and agreed, however, that the Security Deposit shall not be considered an advance payment of rent or a measure of Landlords damages in the event of a default by Tenant.
Landlord shall also be entitled to draw upon the Security Deposit unless, no later than forty-five (45) days prior to the expiration of the Letter of Credit, Tenant delivers to Landlord a renewal or replacement thereof. If such Letter of Credit has not been renewed at least forty-five (45) days prior to
the expiration date thereof and Tenant has not caused such renewal or replacement to occur within five (5) business days after the date of Landlords notice to Tenant, Landlord may immediately draw upon such Letter of Credit and hold the cash proceeds thereof in lieu of such Letter of Credit.
Such Letter of Credit shall contain reasonable provisions for automatic renewal on an annual basis and except as otherwise set forth in subparagraph (iv) below, shall not expire less than ninety (90) days after the expiration or earlier termination of this Lease. All sums held by Landlord pursuant to this Article 4 shall be without interest. Any notices delivered with respect to the Letter of Credit shall comply with the notice provisions set forth in Section 16.07 of this Lease and shall include the following parties:
General Counsel |
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Chief Financial Officer |
Duke Realty Corporation |
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Duke Realty Corporation |
3950 Shackleford Rd., Ste. 300 |
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600 East 96th Street, Ste. 100 |
Duluth, GA 30096-8268 |
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Indianapolis, IN 46240 |
Notwithstanding anything herein to the contrary, at the times set forth below, upon written request from Tenant, and provided that (i) Tenant is not then and has not been for the twelve (12) month period immediately preceeding such request in default under this Lease, and all amounts due and owing are current and were paid timely under the Lease for the twelve (12) month period immediately preceeding such request, (ii) Landlord has not drawn on all or any portion of the Security Deposit prior to such date, and (iii) Tenant provides Landlord with a copy of its most recent financial statement and a certification by Tenants chief financial officer that Tenants tangible net worth on such date is not materially less than Tenants tangible net worth as reflected on Tenants financial statements dated June 30,2002 (together, the Conditions), the amount of the Security Deposit held by Landlord may be reduced over the Lease Term as follows:
(i) Provided that the Conditions are satisfied such that Tenant is entitled to a reduction in the amount of the Security Deposit, then, upon written request from Tenant at the end of the thirty-eighth (38th) month of the Lease Term, the amount of the Security Deposit required to be maintained by Tenant hereunder may be reduced to One Hundred Twenty-Five Thousand and 00/100 Dollars ($125,000.00). In the event that Tenant is entitled to the reduction in the amount of the Security Deposit as provided in this subparagraph, then , either (a) Landlord shall promptly refund to Tenant the excess balance of the Security Deposit (in the event of a cash deposit), or (b) Tenant shall provide Landlord with a replacement for the Letter of Credit (in the same form as the original Letter of Credit) reflecting the reduced amount and Landlord, only after receipt of the replacement for the Letter of Credit in compliance with the terms of this Article 4. shall return the original Letter of Credit in the greater amount to Tenant; and
(ii) Provided that the Conditions are satisfied such that Tenant is entitled to a reduction in the amount of the Security Deposit and provided that the Security Deposit was reduced at the end of the thirty-eighth (38th) month of the Lease Term as provided in subparagraph (i) above, then, upon written request from Tenant, at the end of the seventy-fourth (74th) month of the Lease Term, the amount of the Security Deposit required to be maintained by Tenant hereunder may be reduced to Fifty Thousand and 00/100 Dollars ($50,000.00). In the event that Tenant is entitled to the reduction in the amount of the Security Deposit as provided in this subparagraph, then either (a) Landlord shall promptly refund to Tenant the excess balance of the Security Deposit (in the event of a cash deposit), or (b), Tenant shall provide Landlord with a replacement for the Letter of Credit (in the same form as the original Letter of Credit) reflecting the reduced amount and Landlord, only after receipt of the replacement for the Letter of Credit in compliance with the terms of this Article 4, shall return the previous Letter of Credit in the greater amount to Tenant.
ARTICLE 5 - USE
Section 5.01. Use of Leased Premises. The Leased Premises are to be used by Tenant solely for the Permitted Use and for no other purposes without the prior written consent of Landlord.
Section 5.02. Covenants of Tenant Regarding Use. Tenant shall (i) use and maintain the Leased Premises and conduct its business thereon in a safe, careful, reputable and lawful manner, (ii) subject to the terms and provisions of Section 7.04 hereof, comply with all laws, rules, regulations, orders, ordinances, directions and requirements of any governmental authority or agency, now in force or which may hereafter be in force, including without limitation those which shall impose upon Landlord or Tenant any duty with respect to or triggered by a change in the use or occupation of, or any
improvement or alteration to, the Leased Premises, (iii) comply with any protective covenants applicable to the Park which are in effect as of the effective date hereof and as may hereafter be reasonably adopted and promulgated, provided such does not materially and adversely interfere with the operation of Tenants business in the Leased Premises or any other right and benefit granted to Tenant herein, specifically including that certain Declaration of Covenants, Conditions, Restrictions, Reservations and Easements for Freeport Parkway Business Center Association, Dallas County, Texas, dated September 1, 2001 (the Declaration), a copy of which has been provided to Tenant, (iv) comply with and obey all reasonable directions of the Landlord, including directions as to the non-exclusive use of, and ratio of parking spaces as well as any rules and regulations of which Tenant has received a written copy thereof, provided any directions or rules and regulations shall be nondiscriminatorily enforced against all tenants and occupants of the Project and (v) not do or permit anything to be done in or about the Leased Premises, nor shall Tenant do anything within the Common Areas, which will in any way unreasonably obstruct or interfere with the rights of other tenants or occupants of the Building or injure or unreasonably annoy them. Landlord shall use reasonable efforts to enforce the foregoing clauses (i) through (v) above against all other tenants and occupants of the Project. Landlord shall not be responsible to Tenant for the nonperformance by any other tenant or occupant of the Building of its lease or of any rules and regulations. Tenant shall not overload the floors of the Leased Premises. All damage to the floor structure or foundation of the Building due to improper positioning or storage of items or materials shall be repaired by Landlord at the sole expense of Tenant, who shall reimburse Landlord immediately therefor upon demand. Excluding the lawful use of the Leased Premises for the purposes contemplated herein, Tenant shall not use the Leased Premises, or allow the Leased Premises to be used, for any purpose or in any manner which would invalidate any policy of insurance now or hereafter carried on the Building or increase the rate of premiums payable on any such insurance policy unless Tenant reimburses Landlord as Additional Rent for any increase in premiums charged. By no later than One Hundred Twenty (120) days after the Commencement Date, Tenant shall take possession of the Leased Premises and open for operation of Tenants business therein. Relative to the City of Coppell economic incentive agreements described in Section 9 of Exhibit D hereto, Tenant shall timely perform all obligations imposed upon Tenant as set forth therein, and, in the event of Tenants failure to so perform such obligations, Tenant shall be responsible for, and hold Landlord harmless from, all liabilities to the City of Coppell which may arise on account of such failure.
Section 5.03. Landlords Rights Regarding Use. In addition to the rights specified elsewhere in this Lease, Landlord shall have the following rights regarding the use of the Leased Premises or the Common Areas, each of which may be exercised without notice or liability to Tenant, (a) Landlord may install such signs, advertisements, notices or tenant identification information as it shall deem necessary or proper, to the extent not prohibited in Section 8 of Exhibit D attached hereto; (b) Landlord shall have the right at any time to control, change or otherwise alter the Common Areas as it shall deem necessary or proper, provided that Landlord shall not materially and adversely interfere with the operation of Tenants business in the Leased Premises or any other right and benefit granted to Tenant herein, and provided that Landlord shall not make any such changes within the Prohibited Area shown on Exhibit A-3 attached hereto, without the prior written consent of Tenant, which consent shall not be unreasonably withheld or delayed; and (c) Landlord or Landlords agent shall be permitted to inspect or examine the Leased Premises at any reasonable time upon reasonable notice (except in an emergency when no notice shall be required), and Landlord shall have the right to make any repairs to the Leased Premises which are necessary for its preservation; provided, however, that any repairs made by Landlord shall be at Tenants expense, except as provided in Section 7.02 hereof. Landlord shall incur no liability to Tenant for such entry, nor shall such entry constitute an eviction of Tenant or a termination of this Lease, or entitle Tenant to any abatement of rent therefor. Notwithstanding anything to the contrary contained herein during the term of this Lease, in the event Tenant is operating in 100% of the Building, Landlord shall not, without the prior written consent of Tenant, which consent shall not be unreasonably withheld or delayed, (a) undertake, or allow to be undertaken, any development or redevelopment within the Project which is not in conformity with the Site Plan, (b) reconfigure the Common Areas, as it is shown on the Site Plan, or (c) alter the size or location of curb cuts or private drives that provide access to the Project and/or the Leased Premises.
Section 5.04. Site Conditions. Landlord agrees that the Common Areas shall be designed and constructed substantially in accordance with the Building and Site Work Plans and Specifications and maintained at all times throughout the term of this Lease so that 18-wheeler trucks, UPS delivery trucks and other similar delivery vehicles shall have reasonable ingress and egress to and from adjacent right-of-ways and those areas shown on Exhibit A-5 hereto. Landlord acknowledges that Tenant is entering into this Lease for the purpose of using the Leased Premises as a warehouse and distribution center in connection with Tenants business. Therefore, it is of the utmost importance that 18-wheeler truck access to and from the Project and surrounding highways be available at all times. To this end, Landlord agrees that it will not develop any property or alter any roadway system that Landlord may
own or otherwise affect during the term of this Lease that would materially and adversely interfere with such truck access, nor will Landlord give its consent, where such consent is required, relative to such action by any other party or government.
ARTICLE 6 - UTILITIES AND SERVICES
Landlord, at its expense, shall cause the Leased Premises to be individually metered for gas and electricity service, and shall install the meters and meter vaults and provide the service connections specified in the Plans and Specifications and as otherwise customarily provided. Landlord shall pay for all impact fees, tap fees, hook-up fees, sewer capacity fees, meters, meter vaults and any and all other associated fees whatsoever in connection with the provision of utilities to the Leased Premises, except Tenant shall pay for any service connection fees. Tenant shall obtain in its own name and pay directly to the appropriate supplier the cost of all utility services used solely on the Leased Premises, including the removal and disposal of trash from the Leased Premises. However, if any services or utilities are jointly metered with other property, Landlord shall make a reasonable determination of Tenants proportionate share of the cost of such utilities and services (at rates that would have been payable if such utilities and services had been directly billed by the utilities or services providers) and Tenant shall pay such share to Landlord as a part of Operating Expenses. Except as provided below, Landlord shall not be liable in damages or otherwise for any failure or interruption of any utility or other Building service and no such failure or interruption shall entitle Tenant to terminate this Lease or withhold sums due hereunder. In the event of utility deregulation, Landlord shall choose the service provider. All utility services to the Leased Premises shall be provided by utility providers unaffiliated with Landlord, and shall not be subject to surcharge, mark up or other cost increase by Landlord.
If Landlord fails to provide utility service specifically required to be provided by Landlord under this Lease, and such interruption of service renders the Leased Premises or any portion of the Leased Premises untenantable for more than three (3) consecutive business days after Landlord receives written notice from Tenant of such interruption of service, then rent shall abate with respect to the area which is affected for each such consecutive day after the third business day during which the interruption continues. The rent abatement shall equal the then current Monthly Rental Installment due for the period of the interruption with respect to the square footage affected. The Leased Premises shall be considered untenantable if Tenant does not use the Leased Premises or portion thereof affected in the conduct of its normal business operations as a result of said interruption of service to the Leased Premises. It is agreed and understood that Tenant shall not use nor be entitled to use the Leased Premises or portion thereof affected to conduct its normal business operations during any day for which Landlord is obligated to abate rent hereunder. The abatement herein provided shall be Tenants sole and exclusive remedy for interruption of service. In all events, Landlord agrees to use its reasonable efforts to restore any utility service that is interrupted (other than by the actions of Tenant, its agents and contractors) as soon as possible.
ARTICLE 7 - MAINTENANCE AND REPAIRS
Section 7.01. Tenants Responsibility. During the Lease Term, Tenant shall, at its own cost and expense, maintain the interior, non-structural portions of the Leased Premises in good condition and repair, including, but not limited to the maintenance, repair and replacement, if necessary of the electrical systems, heating and air conditioning systems, elevator, plate glass, floor coverings, windows and doors, sprinkler and plumbing systems, to the extent all of the foregoing exclusively serve the Leased premises and shall obtain a preventive maintenance contract on the heating, ventilating and air-conditioning systems, and provide Landlord with a copy thereof. The preventive maintenance contract shall meet or exceed Landlords standard maintenance criteria, and shall provide for the inspection and maintenance of the heating, ventilating and air conditioning system on not less than a semi-annual basis. In the event Tenant fails to maintain the Leased Premises as required herein or fails to commence repairs (requested by Landlord in writing) within thirty (30) days after such request, or fails diligently to proceed thereafter to complete such repairs, Landlord shall have the right in order to preserve the Leased Premises or portion thereof, and/or the appearance thereof, to make such repairs or have a contractor make such repairs and charge Tenant for the cost thereof as Additional Rent, together with interest at the Interest Rate. Notwithstanding the foregoing to the contrary, in the event Tenant has maintained the heating and air conditioning systems and Building sprinkler systems as herein provided and, during the last twenty-four (24) months of the Lease Term it is necessary for Tenant to replace any heating and air conditioning systems and Building sprinkler systems, the cost for same shall be amortized over the useful life of such item (under generally accepted accounting principles), and, as of the expiration or earlier termination of this Lease, the then-remaining unamortized amount of such cost shall be reimbursed by Landlord to Tenant within thirty (30) days thereafter, accruing interest at the Interest Rate after the expiration of such 30-day period, and as a covenant of Landlord surviving the expiration or termination of this Lease; provided that Landlord shall not have any obligation to reimburse Tenant for
such replacement if such replacement is necessary because of the wrongful or negligent acts or failure to act (where obligated to do so) of Tenant, its agents, contractors, employees or invitees.
Section 7.02. Landlords Responsibility.
A. During the Lease Term, Landlord shall, maintain in good condition and repair, and replace as necessary, the roof, exterior walls, foundation and structural frame of the Building and the parking and landscaped areas, the costs of which shall be included in Operating Expenses, except as otherwise set forth herein; provided, however, that, to the extent any of the foregoing items require repair because of the negligence, misuse, or default of Tenant, its employees, agents, customers or invitees, Landlord shall make such repairs solely at Tenants expense. In addition, Landlord shall; (i) keep the roof of the Building free of leaks and replace the same when reasonably necessary; (ii) maintain the underground and otherwise concealed plumbing and the exterior surface of the outside walls (meaning the exterior building materials and not the aesthetic portions thereof) of the Leased Premises and the Building, excluding window glass, plate glass and doors (unless damage to such glass or doors is caused by a structural shift); (iii) keep in good order, condition and repair the down spouts and gutters of the Leased Premises and the Building; (iv) maintain all fire protection systems not within and exclusively serving the Leased Premises; and (v) be responsible for prompt extermination of termites. The costs of the foregoing shall be included in Operating Expenses, except as otherwise expressly set forth herein. Notwithstanding any provision of this Lease to the contrary, (a) in the event of an emergency and after prior notice to Landlord, or (b) in the event Landlord fails to commence any maintenance or repair of the Leased Premises required under this Section 7.02A within a reasonable time after receipt of written notice from Tenant or fails to complete such maintenance and repair within thirty (30) days after such notice, or such longer period if such maintenance or repairs cannot be completed in thirty (30) days, then, in either of such events, Tenant shall have the right (but not the obligation) to perform Landlords maintenance and repair obligations under this Section 7.02A, and Landlord shall reimburse Tenant for the reasonable actual costs incurred by Tenant within thirty (30) days after Tenant submits a written invoice therefor; together with interest at the Interest Rate.
B. Landlord shall keep and maintain the Common Areas in good condition and repair in a manner consistent with first-class office/warehouse projects of a similar size and nature in the Dallas/Ft. Worth, Texas market. For purposes of this Lease, Common Areas shall include all parking areas, landscape areas, aisles, driveways, entrances, exits, walkways, sidewalks, roadways, loading areas (unless indicated on the Site Plan to the contrary), service roads, lighting facilities (if used to illuminate the Common Areas), surface drainage facilities, traffic control signs and fences. Landlord shall not use or permit the use of all or any portion of the Common Areas for any purposes other than as intended herein, nor shall Landlord permit any type of reserved parking arrangement or grant parking easements to parties that are not tenants of the Building within the Prohibited Area as shown on Exhibit A-3 attached hereto or within the Common Areas, without the prior written consent of Tenant, such consent not to be unreasonably withheld or delayed. Without limiting the generality of the foregoing, Landlord shall not grant any easement upon or across the Common Areas, whether or not reciprocal, for access or parking to any other person, entity or property which would materially and adversely affect Tenants access or use of the Leased Premises for the purposes herein.
Section 7.03. Alterations. Tenant shall not permit alterations in or to the Leased Premises unless and until the plans and the contractor have been approved by Landlord in writing. As a condition of such approval, Landlord may require Tenant to remove the alterations and restore the Leased Premises upon termination of this Lease to the condition existing prior to the installation of such alterations; otherwise, all such alterations shall at Landlords option become a part of the realty and the property of Landlord, and shall not be removed by Tenant. Tenant shall ensure that all alterations shall be made in accordance with all applicable laws, regulations and building codes, in a good and workmanlike manner and of quality equal to or better than the original construction of the Building and that its contractors comply with the terms and conditions of Landlords building standards (which Landlord agrees to furnish to Tenant upon request therefor). Upon completion of the work, Tenant shall provide lien waivers from the subcontractors or a final affidavit of lien waiver from the general contractor, and such lien waiver shall be in a form reasonably acceptable to Landlord. No person shall be entitled to any lien derived through or under Tenant for any labor or material furnished to the Leased Premises, and nothing in this Lease shall be construed to constitute a consent by Landlord to the creation of any lien. If any lien is filed against the Leased Premises for work claimed to have been done for or material claimed to have been furnished to Tenant, Tenant shall cause such lien to be discharged of record or bonded from the Project within thirty (30) days after Tenants actual notice of such lien filing. Tenant shall indemnify Landlord from all costs, losses, expenses and attorneys fees in connection with any construction or alteration to the Leased Premises by Tenant and any related lien.
Notwithstanding anything to the contrary above, Tenant shall have the right to make alterations to the Leased Premises without obtaining Landlords prior written consent provided that (i) excluding replacing carpeting and other floor coverings, such alterations do not exceed Fifty Thousand and No/100 Dollars ($50,000.00) in cost in any one instance; (ii) such alterations are non-structural in nature and do not affect the Building systems; and (iii) Tenant provides Landlord with prior written notice of its intention to make such alterations stating in reasonable detail the nature, extent and estimated cost of such alterations together with the plans and specifications for the same no less than ten (10) days before the date on which Tenant anticipates commencing construction of the same. Tenant shall provide Landlord with copies of the as-built plans and specifications, including CAD drawings, if available, reflecting all such alterations, improvements or additions as completed within fifteen (15) days after the completion thereof.
Notwithstanding anything to the contrary in this Lease, Landlord shall not construct any floors above the Building or place any other improvements thereon other than as specifically provided in the Plans and Specifications.
Section 7.04 Legal Requirements. Landlord hereby represents and warrants that, upon Landlords delivery of the Leased Premises pursuant to Article 2 above, the Building and all parts thereof, excluding the Office Space, shall be in full compliance with all applicable laws, ordinances and regulations of all federal, state, county and municipal authorities governing the Building (Legal Requirements), including Title III of the Americans With Disabilities Act of 1990, any regulations promulgated thereunder and any similar state or local laws or regulations. If Landlord receives a written notice from a governmental authority that the Leased Premises, Common Areas or the Building are not in compliance with a requirement enacted after full execution of this Lease and such noncompliance is not a result of Tenants manner of use or improvements or alterations by Tenant to the Leased Premises, including the Office Space improvements, then Landlord agrees to make the appropriate alteration, the cost of which will be included in Operating Expenses as described in Section 3.02. Further, if as a result of Tenants manner of use or improvements, alterations or modifications made by Tenant, Landlord receives notice from a governmental authority of noncompliance with respect to the Leased Premises, Tenant shall have the option to cause the same to comply or to remove or modify its alterations or modify its use so as to fully remedy the non-compliance.
ARTICLE 8 INSURANCE
Section 8.01. Landlords Insurance. Landlord shall, during the Lease Term, maintain in full force the following insurance: (i) commercial general liability insurance insuring against any liability due to injury or death to any person or loss of or damage to property arising out of the Common Areas, with coverage limits of at least Five Million Dollars ($5,000,000.00) per occurrence; and (ii) All-Risk Property insurance, excluding the perils of earthquake and flood, issued by one or more insurance carriers covering the Leased Premises (excluding all trade fixtures and property required to be insured by Tenant under this Lease) and the Building to the extent of their full replacement value (exclusive of foundation and excavation costs and other uninsurable parts).
Section 8.02. Tenants Insurance. During the Lease Term, Tenant shall maintain the following types of insurance, in the amounts specified and in the form hereinafter provided for:
A. Liability insurance in the Commercial General Liability form (including Broad Form Property Damage and Contractual Liabilities or reasonable equivalent thereto) covering the Leased Premises and Tenants use thereof against claims for bodily injury or death, property damage and product liability occurring upon, in or about the Leased Premises, such insurance to be written on an occurrence basis (not a claims made basis), to be in combined single limits amounts not less than $3,000,000 and to have general aggregate limits of not less than $5,000,000 for each policy year.
B. All Risk Coverage, Vandalism and Malicious Mischief, and Sprinkler Leakage insurance, if applicable, for the full cost of replacement of Tenants trade fixtures, merchandise and personal property.
C. Workers Compensation: minimum statutory amount.
D. Business interruption insurance.
All policies of insurance provided for in this Section 8.02 (i) shall be issued in form reasonably acceptable to Landlord, (ii) shall name Landlord, Landlords managing agent, any mortgagee and any other party having an insurable interest in the Project reasonably designated by Landlord as additional
insureds, and (iii) shall provide that they may not be materially changed or canceled on less than thirty (30) days prior written notice to Landlord. Tenant shall furnish Landlord with Certificates of Insurance evidencing all required coverages on or before the Commencement Date, and thereafter within thirty (30) days prior to the expiration of each such policy.
Section 8.03. Waiver of Subrogation. Landlord and Tenant hereby release the other and waive any rights each may have against the other on account of any loss or damage occasioned to Landlord or Tenant, as the case may be, or their respective property, the Leased Premises, its contents, or other portions of the Building arising from any risk which is insured against under any all risk coverage insurance carried (or required to be carried) by either Landlord or Tenant. All insurance policies maintained by Landlord or Tenant as provided in this Lease shall contain an agreement by the insurer waiving the insurers right of subrogation against the other party to this Lease.
Section 8.04. Tenants Responsibility. All of Tenants trade fixtures, merchandise and personal property in the Leased Premises shall be and remain at Tenants sole risk. Landlord shall not be liable to Tenant or to any other person, and Tenant hereby releases Landlord from (i) any and all liability for theft thereof or any damage thereto occasioned by any act of God or by any acts, omissions or negligence of any persons, and (ii) any and all liability for any injury to the person or property of Tenant or other persons in or about the Leased Premises, the Building or the common areas associated therewith, Tenant expressly agreeing to indemnify and save Landlord, its agents, employees and contractors, harmless, in all such cases, except to the extent caused by the negligence or willful misconduct of Landlord. Tenants obligation to indemnify Landlord hereunder shall include the duty to defend against any claims asserted by reason of such loss, damage or injury and to pay any judgments, settlements, costs, fees and expenses (including attorneys fees) incurred in connection therewith. Notwithstanding the foregoing, nothing contained in this Section 8.04 shall override (or be deemed to override) the waivers contained in Section 8.03 above. This provision shall survive the expiration or earlier termination of this Lease.
Section 8.05. Landlords Responsibility. Subject to Tenants waivers, releases and agreements set forth in this Article 8 and elsewhere in this Lease, Landlord shall indemnify Tenant and hold it harmless from any and all claims and actions brought against Tenant by third parties which (a) arise out of any bodily injury, death or property damage occurring to such third parties in the Common Areas or Building (but excluding the Leased Premises), (b) are not caused in whole or in part by Tenant, its agents, employees or contractors, and (c) are caused in whole or in part by the negligence or willful misconduct of Landlord, its agents, employees or contractors. This provision shall survive the expiration or earlier termination of this Lease.
ARTICLE 9 - CASUALTY
In the event of total or partial destruction of the Building or the Leased Premises by fire or other casualty, Landlord agrees to promptly restore and repair the Leased Premises; provided, however, Landlords obligation hereunder shall be limited to the reconstruction of such of the tenant finish improvements as were originally required to be made by Landlord, if any. Rent shall proportionately abate (which may be a total abatement if the Leased Premises are rendered wholly unusable) during the time that the Leased Premises or part thereof are unusable because of any such damage. Notwithstanding the foregoing, if the Leased Premises are (i) so destroyed that they cannot be repaired or rebuilt within three hundred sixty (360) days from the casualty date; or (ii) totally destroyed by a casualty which is not covered by the insurance required hereunder then, in case of a clause (i) casualty, Tenant may, or, in the case of a clause (ii) casualty, then Landlord may, upon thirty (30) days written notice to the other party, terminate this Lease with respect to matters thereafter accruing. Tenant waives any right under applicable laws inconsistent with the terms of this Article 9. If the Leased Premises should be damaged by fire or other casualty during the last twenty-four (24) months of the term of this Lease and the restoration cost thereof exceeds five percent (5%) of the replacement cost of the entire Building, then, unless Tenant exercises any right it may have to extend the term of this Lease, Landlord may, within thirty (30) days after the determination of the cost of such rebuilding and repairs, terminate this Lease on written notice to Tenant and, in such event, Rent and all other charges payable by Tenant hereunder shall abate as of the date of the happening of such damage. The number of days within which the Leased Premises can be rebuilt or repaired shall be determined by an independent contractor mutually acceptable to both Landlord and Tenant.
ARTICLE 10 - EMINENT DOMAIN
If all or any substantial part of the Building or Common Areas shall be acquired by the exercise of eminent domain, such that the Premises are not usable by Tenant for the Permitted Use, Landlord may terminate this Lease by giving written notice to Tenant on or before the date that actual possession
thereof is so taken. If all or any substantial part of the Leased Premises or Common Areas shall be acquired by the exercise of eminent domain so that the Leased Premises shall become impractical for Tenant to use for the Permitted Use, Tenant may terminate this Lease as of the date that actual possession thereof is so taken by giving written notice to Landlord. Termination of this Lease because of condemnation shall be without prejudice to the rights of either Landlord or Tenant to recover from the condemning authority compensation and damages for the injury or loss sustained by them as a result of the taking. Without limiting the foregoing, Tenant shall have the right to make a claim against the condemning authority for any positive value of its leasehold estate, the value of its trade fixtures, furniture and personal property, damages for interruption or relocation of business in the Leased Premises, loss of good will, moving and remodeling expenses and value of any leasehold improvements paid for by Tenant.
ARTICLE 11 - ASSIGNMENT AND SUBLEASE
Section 11.01. Assignment and Sublease. Tenant shall not assign this Lease or sublet the Leased Premises in whole or in part without Landlords prior written consent, which consent shall not be unreasonably withheld, delayed or denied (provided that it shall not be unreasonable for Landlord to withhold or deny its consent with respect to any proposed assignment or subletting to a third party that is already a tenant in the Building or the Park). Landlord shall consent or withhold its consent (stating with reasonable particularity the grounds upon which consent is being withheld) in writing within a reasonable period of time after Tenants written request therefor, but in no event more than thirty (30) days after Tenants delivery of such request. If Landlord has not withheld consent by written notice to Tenant within said thirty (30) day period, then Tenant shall send Landlord written notice thereof expressly noting therein that if Landlord does not respond to such notice, such failure shall be deemed approval, and if Landlord fails to consent or withhold its consent within ten (10) days of receipt of written notice thereof, Landlord shall be deemed to have consented to such proposed assignment or sublease. Subject to Section 11.02 below, any change in control of Tenant resulting from a merger, consolidation, stock transfer or asset sale shall be considered an assignment or transfer that requires Landlords prior written consent. In the event of any assignment or subletting, Tenant shall remain primarily liable hereunder, and any extension, expansion, rights of first offer, rights of first refusal or other options granted to Tenant under this Lease shall be rendered void and of no further force or effect. The acceptance of rent from any other person shall not be deemed to be a waiver of any of the provisions of this Lease or to be a consent to the assignment of this Lease or the subletting of the Leased Premises. Any assignment or sublease consented to by Landlord shall not relieve Tenant (or its assignee) from obtaining Landlords consent to any subsequent assignment or sublease. Without in any way limiting Landlords right to reasonably withhold its consent to any assignment or subletting of this Lease, Landlord shall be deemed to have reasonably withheld its consent to a proposed assignment or sublease if in Landlords commercially-reasonable opinion (i) the business reputation of the proposed assignee or subtenant is unacceptable; (ii) the financial worth of the proposed assignee or subtenant is insufficient to meet the obligations hereunder; (iii) the prospective assignee or subtenant is a current tenant of the Park or has been within the year preceding Tenants request for consent a bona-fide third-party prospective tenant. If Landlord refuses to give its consent to any proposed assignment or subletting of all of the Leased Premises, Landlord may, at its option, within thirty (30) days after receiving a request to consent, terminate this Lease by giving Tenant thirty (30) days prior written notice of such termination, whereupon each party shall be released from all further obligations and liability hereunder. In the event that Tenant sublets the Leased Premises or any part thereof, or assigns this Lease, and at any time receives rent and/or other consideration which exceeds that which Tenant would at that time be obligated to pay to Landlord, Tenant shall pay to Landlord, as Additional Rent, fifty percent (50%) of such excess in such rent as such rent is received by Tenant and fifty percent (50%) of any other consideration received by Tenant from such assignee or subtenant, net of Tenants cost and expense in effectuating such transfer such as, by way of example only, broker commissions and Tenant interior finishes or allowances for same. Tenant agrees to pay Landlord Five Hundred and No/100 Dollars ($500.00) upon demand by Landlord, to reimburse Landlord for reasonable accounting and attorneys fees incurred in conjunction with the processing and documentation of any such requested assignment, subletting or any other hypothecation of this Lease or Tenants interest in and to the Leased Premises.
Section 11.02. Permitted Transfer. Notwithstanding anything to the contrary contained in Section 11.01 above, provided that Tenant is not in Default hereunder at the time of such transfer, Tenant shall have the right, without Landlords consent, but upon ten (10) days prior notice to Landlord, to (i) sublet all or part of the Leased Premises to any related corporation or other entity which controls Tenant, is controlled by Tenant or is under common control with Tenant; (ii) assign all or any part of this Lease to any related corporation or other entity which controls Tenant, is controlled by Tenant, or is under common control with Tenant, or to a successor entity into which or with which Tenant is
merged or consolidated or which acquires substantially all of Tenants assets in property; or (iii) effectuate any public offering of Tenants stock on the New York Stock exchange, in the NASDAQ over-the-counter market or any other recognized securities exchange or over-the-counter market (hereinafter collectively a Permitted Transferee), provided that in the event of a transfer pursuant to clause (ii) or (iii) the net worth after any such transaction is not less than the net worth of Tenant as of the date preceding such transfer and provided further that such successor entity assumes all of the obligations and liabilities of Tenant. For the purpose hereof control shall mean ownership of not less than fifty percent (50%) of all voting stock or legal and equitable interest in such corporation or entity. Any such transfer shall not relieve Tenant of its obligations under this Lease. In the event of any assignment or subletting permitted under this Section 11.02, Tenant shall remain primarily liable hereunder, and any extension, expansion, rights of first offer, rights of first refusal or other options granted to Tenant under this Lease shall continue in full force and effect and shall not be rendered void and of no further force or effect. Nothing herein shall be deemed to prohibit, or require Landlords consent to, the transfer of stock publicly over a recognized securities exchange or over-the-counter market.
ARTICLE 12 - TRANSFERS BY LANDLORD
Section 12.01. Sale of the Building. In the event of a sale or transfer of Landlords interest in the Project (except a mortgage or other transfer as security for a debt), the Landlord named herein, or in the case of a subsequent transfer, the transferor shall, after the date of such transfer, be automatically released from all personal liability for the performance or observance of any term, condition, covenant or obligation required to be performed or observed by Landlord hereunder, and the transferee shall be deemed to have assumed all of such terms, conditions, covenants and obligations.
Section 12.02. Estoppel Certificate. Within twenty (20) days following receipt of a written request from Landlord, Tenant shall execute and deliver to Landlord, an estoppel certificate in such form as Landlord may reasonably request certifying (i) that this Lease is in full force and effect and unmodified or stating the nature of any modification, (ii) the date to which rent has been paid, (iii) that there are not, to Tenants knowledge, any uncured defaults or specifying such defaults if any are claimed, and (iv) any other matters or state of facts reasonably required respecting the Lease. Such estoppel may be relied upon by Landlord and by any purchaser or mortgagee of the Building.
Section 12.03. Subordination. Non-Disturbance and Attornment. This Lease is and shall be expressly subject and subordinate at all times to the lien of any present or future mortgage or deed of trust encumbering fee title to the Leased Premises. If any such mortgage or deed of trust be foreclosed, upon request of the mortgagee or beneficiary, as the case may be, Tenant will attorn to the purchaser at the foreclosure sale. The foregoing provisions are declared to be self-operative and no further instruments shall be required to effect such subordination and/or attornment; provided, however, that subordination of this Lease to any present or future mortgage or trust deed shall be conditioned upon the mortgagee, beneficiary, or purchaser at foreclosure, as the case may be agreeing that Tenants occupancy of the Premises and other rights under this Lease shall not be disturbed by reason of the foreclosure of such mortgage or trust deed, as the case may be, so long as Tenant is not in default under this Lease; and further provided that Tenant agrees upon request by any such mortgagee, beneficiary, or purchaser at foreclosure, as the case may be, to execute such non-disturbance, subordination and/or attornment instruments as may be reasonably required by such person to confirm such non-disturbance subordination and/or attornment. Landlord hereby represents and warrants to Tenant that there are no mortgages or deeds of trust encumbering all or any portion of the Project. Landlord shall obtain from any future holder of any mortgage or deed of trust encumbering all or any part of the Project, a Subordination, Non-Disturbance and Attornment Agreement, in a form mutually agreeable to such lender, Tenant and Landlord, providing among other things that the holder will recognize Tenants lease of the Leased Premises hereunder and will not disturb Tenants quiet possession of the Leased Premises as long as Tenant is not in Default under provisions of this Lease.
ARTICLE 13 - DEFAULT AND REMEDY
Section 13.01. Default. The occurrence of any of the following shall be a Default:
A. Tenant fails to pay any Monthly Rental Installment or Additional Rent when due, and such failure continues for ten (10) days after Landlords delivery of written notice to Tenant thereof. Notwithstanding the foregoing, Landlord shall not be obligated to provide Tenant with more than two (2) written notices of default from Landlord per calendar year.
B. Tenant fails to perform or observe any other term, condition, covenant or obligation required under this Lease for a period of thirty (30) days after notice thereof from Landlord; provided, however, that if the nature of Tenants default is such that more than thirty (30) days are reasonably required to cure, then such default shall be deemed to have been cured if Tenant commences such performance within said 30-day period and thereafter diligently completes the required action within a reasonable time.
C. Tenant shall assign or sublet all or a portion of the Leased Premises in contravention of the provisions of Article 11 of this Lease.
D. All or substantially all of Tenants assets in the Leased Premises or Tenants interest in this Lease are attached or levied under execution [and Tenant does not discharge the same within sixty (60) days after Tenants actual notice thereof]; a petition in bankruptcy, insolvency or for reorganization or arrangement is filed by or against Tenant [and Tenant fails to secure a stay or discharge thereof within sixty (60) days after Tenants actual notice thereof]; Tenant makes a general assignment for the benefit of creditors; Tenant takes the benefit of any insolvency action or law; the appointment of a receiver or trustee in bankruptcy for Tenant or its assets if such receivership has not been vacated or set aside within sixty (60) days after Tenants actual notice thereof; or, dissolution or other termination of Tenants corporate charter if Tenant is a corporation and such is not reinstated or re-established within thirty (30) days after Tenants actual notice thereof.
Section 13.02. Remedies. Upon the occurrence of any Default, Landlord shall have the following rights and remedies, in addition to those allowed by law or in equity, any one or more of which may be exercised without further notice to Tenant:
A. Landlord may terminate this Lease as of the date of such Default, and thereafter (i) neither Tenant nor any person claiming under or through Tenant shall be entitled to possession of the Leased Premises, and Tenant shall immediately surrender the Leased Premises to Landlord in accordance with Section 2.03 and Exhibit E of this Lease; and (ii) Landlord may re-enter the Leased Premises and dispossess Tenant and any other occupants of the Leased Premises by any lawful means and may remove their effects, without prejudice to any other remedy which Landlord may have. Upon the termination of this Lease, Landlord may declare an amount equal to (i) the value of the excess, if any, discounted at the Prime Rate of (A) all rent which would have been due under this Lease for the balance of the Lease Term (the Remaining Term) less (B) the aggregate reasonable rental value of the Leased Premises for the Remaining Term, which can be collected by Landlord (Tenant shall bear the burden of proving such rental value), to be immediately due and payable, whereupon Tenant shall be obligated to pay the same to Landlord, together with all loss or damage which Landlord may sustain by reason of Tenants Default (Default Damages), which shall include without limitation expenses of preparing the Leased Premises for re-letting, demolition, repairs, tenant finish improvements, brokers commissions and attorneys fees, it being expressly understood and agreed that the liabilities and remedies specified in this subsection (b) shall survive the termination of this Lease. In addition to the Default Damages, Landlord shall be entitled to any amounts or damages payable by Tenant to Landlord and accruing prior to the date of termination, which for all purposes shall include, but not be limited to, accrued rent and interest thereon, late charges and interest thereon the unamortized cost of Tenants improvements, brokers fees and commissions, attorneys fees, any moving allowances and any other costs incurred by Landlord in connection with making or executing this Lease. Nothing contained in this Lease shall limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency by reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether the amount be greater, equal to, or less than the amount of the loss or damages referred to above.
B. Landlord may, without terminating this Lease, terminate Tenants right to possession of the Leased Premises as of the date of Tenants Default, and re-enter the Leased Premises and thereafter (i) neither Tenant nor any person claiming under or through Tenant shall be entitled to possession of the Leased Premises, and Tenant shall immediately surrender the Leased Premises to Landlord; and (ii) Landlord may re-enter the Leased Premises and dispossess Tenant and any other occupants of the Leased Premises by any lawful means and may remove their effects, without prejudice to any other remedy which Landlord may have. Thereafter, Landlord may, but shall not be obligated to, re-let all or any part of the Leased Premises as the agent of Tenant for a term different from that which would otherwise have constituted the balance of the Lease Term and for rent and on terms and conditions different from those contained herein, whereupon Tenant shall be obligated to pay to Landlord as liquidated damages the difference between the rent provided for herein and that provided for in any lease covering a subsequent re-letting of the Leased Premises, for the period that would otherwise have
constituted the balance of the Lease Term, together with all Default Damages. Neither the filing of a dispossessory proceeding nor an eviction of personalty in the Leased Premises shall be deemed to terminate the Lease.
C. Landlord may, without judicial process enter upon the Leased Premises, by force if necessary, without having any civil or criminal liability therefor (including specifically any liability or duty under Section 93.002 of the Texas Property Code which is superseded by this Section 13.02). and do whatever Tenant is obligated to do under the terms of this Lease, and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in effecting compliance with Tenants obligations under this Lease plus an administrative fee equal to ten percent (10%) of the amount of such reimbursement. Tenant further agrees that Landlord shall not be liable for any damages resulting to Tenant from such action, whether caused by the negligence of Landlord or otherwise.
D. Any repossession of or re-entering on the Leased Premises by Landlord under this Article shall be without liability or responsibility for damages to Tenant. No repossession of or re-entering upon the Leased Premises or any part thereof pursuant to Lease or otherwise and no reletting of the Leased Premises or any part thereof pursuant to this Lease shall relieve Tenant or any guarantor of its liabilities and obligations hereunder, all of which shall survive such repossession or re-entering. In the event of any such repossession of or re-entering upon the Leased Premises or any part thereof by reason of the occurrence of an event of Default, Tenant will continue to pay to Landlord Rent required to be paid by Tenant.
E. No right or remedy herein conferred upon or reserved to Landlord is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder or now or hereafter existing at law or in equity or by statute. In addition to the other remedies provided in this Lease, Landlord shall be entitled, to the extent permitted by applicable law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the covenants, agreements, conditions or provisions of this Lease, or to a decree compelling performance of any of the covenants, agreements, conditions or provisions of this Lease, or to any other remedy allowed to Landlord at law or in equity.
F. If Landlord repossesses the Leased Premises pursuant to the authority herein granted or provided at law or in equity, then Landlord shall have the right to remove and store all of the furniture, fixtures and equipment at the Leased Premises, including that which is owned by or leased to Tenant at all times prior to any foreclosure thereon by Landlord or repossession thereof by any Landlord thereof or third party having a superior lien thereon. Landlord also shall have the right to relinquish possession of all or any portion of such furniture, fixtures, equipment and other property to any person (a Claimant) who presents to Landlord a copy of any instrument represented by Claimant to have been executed by Tenant (or any predecessor of Tenant) granting Claimant the right under various circumstances to take possession of such furniture, fixtures, equipment or other property, without the necessity on the part of Landlord to inquire into the authenticity or legality of said instrument. The rights of Landlord herein stated shall be in addition to any and all other rights that Landlord has or may hereafter have at law or in equity; and Tenant stipulates and agrees that the rights herein granted Landlord are commercially reasonable.
G. No agreement to accept a surrender of the Leased Premises and no act or omission by Landlord or Landlords agent during the term shall constitute an acceptance or surrender of the Leased Premises unless made in writing and signed by Landlord. No reentry or taking possession of the Leased Premises by Landlord shall constitute an election by Landlord to terminate this Lease unless a written notice of such intention is given to Tenant.
H. Landlord shall be required only to use commercially reasonable efforts to mitigate damages, which shall not exceed such efforts as Landlord generally uses to lease other space in the Building. Landlord will not be deemed to have failed to mitigate if Landlord leases any other portions of the Building before reletting all or any portion of the Leased Premises. Landlord shall not be deemed to have failed to mitigate if it incurs Default Damages. Tenant shall bear the burden of proof that Landlord failed to mitigate.
Section 13.03. Landlords Default and Tenants Remedies. Landlord shall be in default if it fails to perform any term, condition, covenant or obligation required under this Lease for a period of thirty (30) days after written notice thereof from Tenant to Landlord; provided, however, that if the term, condition, covenant or obligation to be performed by Landlord is such that it cannot reasonably be performed within thirty (30) days, such default shall be deemed to have been cured if Landlord commences such performance within said thirty-day period and thereafter diligently undertakes to complete the same. Upon the occurrence of any such default, Tenant may sue for injunctive relief or to recover damages for any loss directly resulting from the breach, or Tenant may (but shall not be
obligated to) perform the obligation of Landlord after first giving Landlord thirty (30) days prior written notice of its intent to cure such default by Landlord, and the reasonable actual cost thereof shall be payable from Landlord to Tenant upon demand with interest at the Interest Rate.
If Landlord fails to reimburse Tenant within thirty (30) days from receipt of written notice for the reasonable actual cost of performing Landlords obligation, or if Landlord fails to timely pay to Tenant any other amount due to Tenant under this Lease within thirty (30) days after Tenant gives Landlord written notice of such past due amount, then Tenant may in either of such events deduct any such amounts owing from Landlord, plus interest thereon at the Interest Rate payable as of the date of Tenants notice, from Monthly Rental Installments or other charges due or to become due Landlord under this Lease; provided however, that in no event shall Tenant be entitled to terminate this Lease or withhold, offset or abate any sums due hereunder except as otherwise provided herein or pursuant to an order from a court of competent jurisdiction. Pending the outcome of such suit, Tenant may tender to the court rather than to Landlord rent payments thereafter coming due under this Lease up to the amount claimed by Tenant to be owed to Tenant from Landlord.
Section 13.04. Limitation of Landlords Liability.
A. If at any time Landlord shall fail to perform or pay any covenant or obligation on its part to be performed or paid hereunder or shall breach any warranty or otherwise incur any liability for damages hereunder, and as a consequence thereof Tenant or its successors and assigns shall recover a money judgment against Landlord, such judgment shall be enforced against and satisfied out of only (i) the proceeds of sale produced upon execution of such judgment and levy thereon against Landlords interest in the Leased Premises and the improvements thereon; (ii) the rents, issues, or other income receivable from the Leased Premises and the improvements thereon subsequent to the entry of the money judgment; (iii) the consideration received by Landlord from the sale or mortgage financing of all or any part of Landlords interest in the Leased Premises and improvements thereon made subsequent to the entry of the money judgment; and (iv) any insurance proceeds or condemnation awards payable as/for lost rent by reason of any casualty to or condemnation of the Leased Premises and/or improvements thereon subsequent to the entry of the money judgment. Tenant shall look solely to the Leased Premises and improvements thereon and to said property specified in clauses (i), (ii), (iii) and (iv) above, for the payment and satisfaction of any such claim or action and any judgment thereon.
B. Notwithstanding any other provision of this Lease to the contrary, Landlord shall not have any personal liability whatsoever for the performance or payment of any covenant, obligation, warranty or damages of Landlord hereunder or any judgment thereon, all such liability hereby being expressly waived and released by Tenant and its successors and assigns. Tenant shall not seek specific performance individually or collectively against any individual comprising Landlord for performance of any covenant or obligation of Landlord hereunder and Landlords obligation to specifically perform any such covenant or obligation shall be limited to the performance that can be achieved with the property, or proceeds thereof, specified in clauses (i), (ii), (iii) and (iv) of subsection A above.
C. The provisions of subsections A and B above are not intended to relieve Landlord from the performance of any of its obligations hereunder, but rather to limit Landlords liability as aforesaid.
Section 13.05. Nonwaiver of Defaults. Neither partys failure or delay in exercising any of its rights or remedies or other provisions of this Lease shall constitute a waiver thereof or affect its right thereafter to exercise or enforce such right or remedy or other provision. No waiver of any default shall be deemed to be a waiver of any other default. Landlords receipt of less than the full rent due shall not be construed to be other than a payment on account of rent then due, nor shall any statement on Tenants check or any letter accompanying Tenants check be deemed an accord and satisfaction. No act or omission by Landlord or its employees or agents during the Lease Term shall be deemed an acceptance of a surrender of the Leased Premises, and no agreement to accept such a surrender shall be valid unless in writing and signed by Landlord.
Section 13.06. Attorneys Fees. If either party defaults in the performance or observance of any of the terms, conditions, covenants or obligations contained in this Lease and the non-defaulting party obtains a judgment against the defaulting party, then the defaulting party agrees to reimburse the non-defaulting party for reasonable attorneys fees incurred in connection therewith.
ARTICLE 14 PARKING
Landlord shall provide Tenant and its employees, customers and other invitees, and all other tenants or occupants of the Building and their respective employees, customers and other invitees, with
the non-exclusive use of parking spaces on the Land of not less than one (1) parking space per five thousand (5,000) square feet of rentable area of warehouse space in the Building and three (3) parking spaces per one thousand (1,000) square feet of rentable area of office space in the Building. Tenant shall have the exclusive right to use those parking spaces located within the Reserved Parking Area as designated on Exhibit A-4 attached hereto. No vehicle may be repaired or serviced in the parking area and any vehicle deemed abandoned by Landlord will be towed from the project and all costs therein shall be borne by the vehicle owner. All driveways, ingress and egress, and all parking spaces are for the joint use of all tenants. There shall be no parking permitted on any of the streets or roadways located within the Park.
ARTICLE 15 - LANDLORDS AND TENANTS RESPONSIBILITY REGARDING ENVIRONMENTAL LAWS AND HAZARDOUS SUBSTANCES.
Section 15.01. Definitions.
A. Environmental Laws - All present or future federal, state and municipal laws, codes, orders, decrees, ordinances, rules and regulations applicable to the environmental and ecological condition of the Leased Premises as well as the rules and regulations of the Federal Environmental Protection Agency or any other federal, state or municipal agency or governmental board or entity regulating, relating to, or imposing liabilities or standards of conduct concerning any hazardous, toxic, or dangerous waste, substance, material, gas, or petroleum product and having jurisdiction over the Leased Premises.
B. Hazardous Substances - Those substances included within the definitions of hazardous substances, hazardous materials, toxic substances solid waste or infectious waste under Environmental Laws and petroleum products.
Section 15.02. Compliance. Tenant, at its sole cost and expense, shall promptly comply with the Environmental Laws including any notice from any source having jurisdiction over the Leased Premises and issued pursuant to the Environmental Laws or issued by any insurance company which shall impose any duty upon Tenant with respect to the use, occupancy, maintenance or alteration of the Leased Premises whether such notice shall be served upon Landlord or Tenant.
Section 15.03. Restrictions on Tenant. Tenant agrees not to store any Hazardous Materials on the Leased Premises and agrees not to release or discard any Hazardous Materials on the Leased Premises or the Project; provided, however, Tenant may store, handle and use the following chemicals, substances or materials if they are used, stored, handled and disposed of in material compliance with Environmental Laws then in effect: (i) chemicals, substances or materials in quantities routinely used in office areas; (ii) janitorial supplies, cleaning fluids or other chemicals, substances or materials in quantities reasonably necessary for the day-to-day operation or maintenance of the Leased Premises by Tenant, and (iii) chemicals, substances or materials, reasonably necessary for the construction or repair of improvements on the Leased Premises.
Section 15.04. Notices. Affidavits. Etc. Tenant shall immediately notify Landlord of (i) any violation by Tenant, its employees, agents, representatives, customers, invitees or contractors of the Environmental Laws on, under or about the Leased Premises, or (ii) the presence or suspected presence of any Hazardous Substances on, under or about the Leased Premises and shall immediately deliver to Landlord any notice received by Tenant relating to (i) and (ii) above from any source. Tenant shall execute affidavits, representations and the like within fifteen (15) days of Landlords request therefor concerning Tenants best knowledge and belief, without independent inquiry, regarding the presence of any Hazardous Substances on, under or about the Leased Premises.
Section 15.05. Landlords Rights. Landlord and its agents shall have the right, but not the duty, upon advance notice (except in the case of emergency when no notice shall be required) to inspect the Leased Premises and conduct tests thereon to determine whether or the extent to which there has been a violation of Environmental Laws by Tenant or whether there are Hazardous Substances on, under or about the Leased Premises. In exercising its rights herein, Landlord shall use reasonable efforts to minimize interference with Tenants business but such entry shall not constitute an eviction of Tenant, in whole or in part, and Landlord shall not be liable for any interference, loss, or damage to Tenants property or business caused thereby.
Section 15.06. Tenants Indemnification. Tenant shall indemnify Landlord and Landlords managing agent from any and all claims, losses, liabilities, costs, expenses and damages, including attorneys fees, costs of testing and remediation costs, incurred by Landlord in connection with any
breach by Tenant of its obligations under this Article 15. The covenants and obligations under this Article 15 shall survive the expiration or earlier termination of this Lease.
Section 15.07. Landlords Representation and Indemnity. Notwithstanding anything contained in this Article 15 to the contrary, Tenant shall not have any liability to Landlord under this Article 15 resulting from any conditions existing, or events occurring, or any Hazardous Substances existing or generated, at, in, on, under or in connection with the Leased Premises prior to the Commencement Date of this Lease except to the extent Tenant exacerbates the same. Tenant hereby acknowledges receipt of that certain Report of Phase I Environmental Site Assessment prepared by Law Engineering and Environmental Services, Inc. and dated as of November, 2000 (the Environmental Report). Landlord hereby warrants and represents to its actual knowledge, without independent investigation, that as of the date of execution of this Lease, that the land underlying the Building is not in violation of any applicable Environmental Laws. Landlords actual knowledge is limited to those matters set forth in the Environmental Report. Landlord will indemnify, defend and save Tenant harmless from any and all actions, proceedings, claims, costs, including reasonable attorneys fees, expenses and losses of any kind pertaining to, concerning or derived in the event of a breach of the representations of Landlord hereunder. Nothing in this paragraph shall be interpreted as imposing any liability on Landlord for any consequential damages or any other costs or expenses incurred by Tenant including any lost sales or profits of Tenant resulting from any such presence or alleged presence. The covenants and obligations under this Article 15 shall survive the expiration or earlier termination of this Lease.
ARTICLE 16 - MISCELLANEOUS
Section 16.01. Benefit of Landlord and Tenant. This Lease shall inure to the benefit of and be binding upon Landlord and Tenant and their respective successors and assigns.
Section 16.02. Governing Law. This Lease shall be governed in accordance with the laws of the State where the Building is located.
Section 16.03. Guaranty. Not Applicable.
Section 16.04. Force Majeure. Landlord and Tenant (except with respect to the payment of any monetary obligation) shall be excused for the period of any delay in the performance of any obligation hereunder when such delay is occasioned by causes beyond its control and in a partys performance hereunder due to act of God, adverse weather, fire, earthquake, flood, explosion, war, invasion, insurrection, riot, mob violence, sabotage, vandalism, failure of transportation, strikes, lockouts, litigation, condemnation, requisition, governmental restrictions including inability or delay in obtaining governmental consents, inspections or permits, laws or orders of governmental, civil, military or naval authorities, or any other cause, whether similar or dissimilar to the foregoing.
Section 16.05. Examination of Lease. Submission of this instrument for examination or signature to Landlord or Tenant does not constitute a reservation of or option for Lease, and it is not effective as a Lease or otherwise until execution by and delivery to both Landlord and Tenant.
Section 16.06. Indemnification for Leasing Commissions. Tenants Broker and Landlords Broker (collectively, Broker) shall each be entitled to receive a commission from Landlord in the amounts, and upon the terms and conditions, contained in a separate commission agreement between Landlord and such parties. Tenant warrants and represents to Landlord that, other than Broker, no other party is entitled, as a result of the actions of Tenant, to a commission or other fee resulting from the execution of this Lease; and in the event Tenant extends or renews this Lease, or expands the Leased Premises, and Tenants Broker is entitled to a commission under the above-referenced commission agreement, Tenant shall pay all commissions and fees payable to any party (other than Tenants Broker) engaged by Tenant to represent Tenant in connection therewith. Landlord warrants and represents to Tenant that, except as set forth above, no other party is entitled, as a result of the actions of Landlord, to a commission or other fee resulting from the execution of this Lease. Landlord and Tenant agree to indemnify and hold each other harmless from any loss, cost, damage or expense (including reasonable attorneys fees) incurred by the nonindemnifying party as a result of the untruth or incorrectness of the foregoing warranty and representation, or failure to comply with the provisions of this subsection. Tenants Broker is representing Tenant in connection with this Lease, and is not representing Landlord. Landlords Broker, or employees of Landlord or its affiliates, are representing Landlord and are not representing Tenant.
Section 16.07. Notices. Any notice required or permitted to be given under this Lease or by law shall be deemed to have been given if it is written and delivered in person or by overnight courier
or mailed by certified mail, postage prepaid, to the party who is to receive such notice at the address specified in Article 1. If delivered in person, notice shall be deemed given as of the delivery date. If sent by overnight courier, notice shall be deemed given as of the first business day after sending. If mailed, the notice shall be deemed to have been given on the date which is three business days after mailing. Either party may change its address by giving written notice thereof to the other party.
Section 16.08. Partial Invalidity; Complete; Agreement. If any provision of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions shall remain in full force and effect. This Lease represents the entire agreement between Landlord and Tenant covering everything agreed upon or understood in this transaction. There are no oral promises, conditions, representations, understandings, interpretations or terms of any kind as conditions or inducements to the execution hereof or in effect between the parties. No change or addition shall be made to this Lease except by a written agreement executed by Landlord and Tenant.
Section 16.09. Financial Statements. During the Lease Term and any extensions thereof, Tenant shall provide to Landlord on an annual basis, within one hundred fifty (150) days following the end of Tenants fiscal year, a copy of Tenants most recent financial statements (certified and audited if the Minimum Annual Rent hereunder exceeds $100,000) prepared as of the end of Tenants fiscal year. Such financial statements shall be signed by an officer of Tenant who shall attest to the truth and accuracy of the information set forth in such statements. All financial statements provided by Tenant to Landlord hereunder shall be prepared in conformity with generally accepted accounting principles, consistently applied.
Section 16.10. Intentionally Omitted.
Section 16.11. Consent. Where the consent of a party is required, such consent will not be unreasonably withheld.
Section 16.12. Memorandum of Lease. Tenant shall have the right to record a memorandum of lease with respect to the Leased Premises in a form agreed to by Landlord. Landlord shall execute the memorandum of lease within ten (10) business days after its receipt from Tenant and return it to Tenant for recordation with the real estate records of Dallas County, Texas. Such memorandum shall provide that Tenant grants to Landlord a power of attorney to execute and record a termination of such memorandum of lease without further action by Tenant in the event that the Lease terminates or expires for any reason and Tenant shall not have executed a termination of such memorandum of lease within ten (10) business days after Landlord sending such termination to the last address of Tenant known to Landlord.
Section 16.13. Time. Time is of the essence of each term and provision of this Lease.
Section 16.14. Representations and Warranties. The undersigned represent and warrant that (i) such party is duly organized, validly existing and in good standing (if applicable) in accordance with the laws of the state under which it was organized; (ii) the Tenant is authorized to do business in the State where the Building is located; and (iii) the individual executing and delivering this Lease has been properly authorized to do so, and such execution and delivery shall bind such party.
Section 16.15. Determination of Charges. Landlord and Tenant agree that each provision of the Lease for determining charges and amounts payable by Tenant (including provisions regarding Additional Rent) is commercially reasonable and, as to each such charge or amount, constitutes a statement of the amount of the charge or a method by which the charge is to be computed for purposes of Section 93.004 of the Texas Property Code, as enacted by House Bill 2186, 77th Legislature.
Section 16.16. ERISA.
A. Tenant acknowledges that it has been advised that an affiliate of Landlord is a collective investment fund (the Fund) which holds the assets of one or more employee benefit plans or retirement arrangements which are subject to Title I the Employee Retirement Income Security Act of 1974, as amended (ERISA) and/or Section 4975 of the Internal Revenue Code of 1986, as amended (the Code) (each a Plan), and with respect to which Morgan Guaranty Trust Company of New York (MGT) is the Trustee and that, as a result, Landlord may be prohibited by law from engaging in certain transactions.
B. Landlord hereby represents and warrants to Tenant that, as of the date hereof, the only Plans whose assets are invested in the Fund which, together with the interests of any other Plans maintained by the same employer or employee organization, represent a collective interest in the Fund in
excess of ten percent (10%) of the total interests in the Fund (each, a 10% Plan) are referenced on Schedule A (collectively, the Existing 10% Plan).
C. Tenant represents and warrants that as of the date hereof, and at all times while it is a Tenant under this Lease, one of the following statements is, and will continue to be, true: (1) Tenant is not a party in interest (as defined in Section 3(14) of ERISA) or a disqualified person (as defined in Section 4975 of the Code) (each a Party in Interest) with respect to the Existing 10% Plan or, (2) if Tenant is a Party in Interest, that:
(i) neither Tenant nor its affiliate (as defined in Section V(c) of PTCE [Prohibited Transaction Class Exemption] 84-14, Affiliate) has, or during the immediately preceding one (1) year has, exercised the authority to either: (i) appoint or terminate MGT as the qualified professional asset manager (as defined in Section V(a) of PTCE 84-14, QPAM) of any of the assets of the Existing 10% Plan with respect to which Tenant or its Affiliate is a Party in Interest; or (ii) negotiate the terms of the management agreement with MGT, including renewals or modifications thereof, on behalf of the Existing 10% Plan; and
(ii) neither Tenant nor any entity controlling, or controlled by, Tenant owns a five percent (5%) or more interest (within the meaning of PTCE 84-14, 5% Interest) in J.P. Morgan Chase & Co.
D. In the event that Landlord or the Fund notifies Tenant in writing that a Plan other than the Existing 10% Plan may become a 10% Plan, Tenant will, within twenty (20) days of such notification, inform the Fund in writing as to whether it can make the same representations which it made in subsection (C) of this Section 16.16 with respect to such prospective 10% Plan. If Tenant notifies Landlord or the Fund that Tenant cannot make such representations with respect to the prospective 10% Plan, then such prospective Plan shall not become a 10% Plan. If, based on Tenants notification that it can make such representations, such Plan becomes a 10% Plan, Tenant represents and warrants that, at all times during the period Tenant is a tenant under the Lease, one of the statements set forth in subsection (C) will be true with respect to such 10% Plan.
Section 16,17. Landlords Subordination. Within twenty (20) days after request from Tenant, Landlord shall execute a subordination agreement in favor of Tenants lender with respect to any liens arising in favor of Landlord against Tenants fixtures and personal property. Such subordination agreement shall be in a form reasonably acceptable to Landlord, Tenant and Tenants lender.
Section 16.18. Antenna and Satellite Dish.
A. Provided Tenant is not in default under the Lease, and provided further that Tenant complies with all zoning and other municipal and county rules and regulations, Tenant shall have the right, at its own cost and expense and subject to the terms hereof, to install, operate and maintain on the roof of the Leased Premises, up to three (3) microwave satellite dishes (the Dishes); provided that Tenant shall only have such rights to the extent the Dish is used exclusively for Tenants purposes and no other purposes whatsoever. Additional dishes shall be charged a rental rate of Fifty Dollars ($50.00) per month (prorated for any partial month) payable to Landlord as additional rent hereunder on the first day of each month commencing upon installation of the additional Dish. Tenant shall execute a separate licensing agreement for each Dish. Tenant shall be solely responsible for obtaining any necessary permits and licenses required to install and operate the Dishes. Copies of such permits and licenses shall be provided to Landlord.
B. The size, location, design and manner of installation of the Dishes and all related wiring shall be designated and approved by Landlord. After obtaining written approval of Landlord, Tenant shall have reasonable access to the roof for installation and maintenance of the Dishes and shall have the right to install all reasonable wiring related thereto. However, unless otherwise approved by Landlord in writing, in no event shall Tenant be permitted to penetrate the roof membrane in connection with the installation or maintenance of the Dishes.
C. Tenant represents and warrants that the installation and maintenance of the Dishes will not cause any damage to the structural portions of the Building. Tenant shall be responsible for repairing any such damages to the structure.
D. Tenant shall install, operate and maintain the Dishes in accordance with all federal, state and local laws and regulations. Prior to installation of any Dish, Tenant shall, on behalf of the installer, provide Landlord with a certificate of insurance reasonably satisfactory to Landlord.
E. Tenant reserves the right to discontinue its use of any Dish at any time prior to the termination of the Lease or any renewal or extension thereof for any reason whatsoever, provided that Tenant gives thirty (30) days prior written notice thereof to Landlord. Tenant shall be responsible for all costs of removal and for restoring the Building to its original condition after such removal. Notwithstanding the foregoing, Tenant agrees within fifteen (15) days after written notice from Landlord to (i) remove any Dish in the event any governmental entity or applicable law or regulation requires removal thereof or Tenant fails to comply with the terms stated herein; or (ii) relocate any Dish in the event the Dish interferes with any existing dish. Such removal or relocation shall be in accordance with all of the terms and conditions set forth herein. If Tenant elects not to remove the Dish from the Building, upon expiration or earlier termination of this Lease, or after expiration of the five (5) day notice period provided herein, the Dish shall be deemed abandoned by Tenant and shall become the property of Landlord.
F. Any language in the Lease notwithstanding, Landlord shall not be liable and Tenant shall indemnify, defend and hold Landlord harmless from and against any and all liability, damages (including but not limited to personal injury, death, or property damages), costs, expenses, and attorneys fees incurred by Landlord arising from any Dish related cause whatsoever, including those arising from the installation, use, maintenance and removal thereof.
G. In the event Tenant exercises its option to extend the term of the Lease as provided in Section 1 of Exhibit D of the Lease, Landlord and Tenant hereby acknowledge and agree that the rental rate for the Dishes shall be adjusted in accordance with the terms of the option to extend.
Section 16.19. Covenant of Quiet Enjoyment. Landlord covenants and agrees with Tenant that, except as otherwise provided in this Lease, upon the continuing compliance by Tenant with all of the terms, covenants and provisions of this Lease to be performed by Tenant, Tenant shall and may peaceably and quietly have, hold and enjoy the Leased Premises for the Lease Term, free from any interference whatsoever by, from or through Landlord or anyone claiming by, from or through Landlord.
[Signatures carried forward to next page]
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day and year first above written.
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LANDLORD: | |||
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TEXAS DUGAN LIMITED PARTNERSHIP, a Delaware limited partnership | |||
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By: |
DUGAN GENERAL PARTNER LLC, a Delaware limited liability company, its general partner | ||
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By: |
DUGAN TEXAS LLC, a Delaware limited liability company, its sole member | |
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By: |
DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership, its Manager | |
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By: |
DUKE REALTY CORPORATION, an Indiana corporation, its general Partner | |
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By: |
/s/ Jeffrey D. Turner |
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Name: |
Jeffrey D. Turner |
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Title: |
SVP |
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TENANT: | |||
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THE CONTAINER STORE, INC. | |||
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By: |
/s/ Valerie Richardson | ||
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Valerie Richardson, Vice President |
EXHIBIT D
SPECIAL STIPULATIONS
The Special Stipulations set forth herein are hereby incorporated into the body of the Lease to which these Special Stipulations are attached, and to the extent of any conflict between these Special Stipulations and the Lease, these Special Stipulations shall govern and control.
1. OPTION TO RENEW
A. Option to Renew. Provided that (i) the Lease is in full force and effect, (ii) Tenant has not been in Default beyond any applicable cure periods more than two times in the last year of the initial term of the Lease (iii) the creditworthiness of Tenant, as revealed by its most current financial statements, is materially the same as or better than on the date of the Lease, (iv) Tenant originally named herein or a Permitted Transferee remains in possession of and has been continuously operating in substantially the entire Leased Premises throughout the Lease Term, and (v) the current use of the Leased Premises is consistent with the Permitted Use or other use approved by Landlord (together, items (i) through (v) shall be referred to as the Conditions), Tenant shall have the option to extend the Lease Term for three (3) successive periods of five (5) years (each an Extension Term). Each Extension Term shall be upon the same terms and conditions contained in the Lease except the Minimum Annual Rent for each Extension Term shall be adjusted as set forth in subparagraph (B) below (Rent Adjustment). Tenant shall exercise such option by delivering to Landlord, no later than three hundred sixty (360) days prior to the expiration of the then existing Lease Term, written notice of Tenants desire to extend the Lease Term (Tenants Notice). Notwithstanding the foregoing, in the event Tenant does not exercise any of its extension options in the time period or in the manner provided in this Section 1(A), each such option shall nevertheless continue in full force and effect and shall not lapse until fifteen (15) days after Landlord has notified Tenant in writing that Tenants option is to expire. Landlord shall notify Tenant of the amount of the Rent Adjustment within thirty (30) days after the delivery of Tenants Notice. Tenant shall have twenty (20) days following its receipt of Landlords notice to notify Landlord in writing that Tenant either (a) requests the broker arbitration set forth hereinbelow, (b) revokes its election to extend the term of this Lease, or (c) accepts the Rent Adjustment. If Tenant elects to revoke its extension notice, this Lease shall continue until the expiration of the then-current term as if Tenant had never delivered to Landlord such extension notice.
If Tenant fails to give such notice within said 20-day period, then Tenant shall be deemed to have requested broker arbitration.
If broker arbitration is initiated as described above, then Landlord and Tenant shall each, within ten (10) days after Landlords receipt of Tenants written request or the expiration of the aforesaid 20-day period, as applicable, select a licensed real estate broker (the Brokers) with a minimum of ten (10) years of leasing experience regarding office/warehouse space in Dallas, Texas (the Marketplace) to determine the Rent Adjustment. If the Brokers are unable to agree as to the Rent Adjustment within thirty (30) days after the date of the appointment of the last of such Brokers, then the Brokers shall, within five (5) days after the end of the thirty-day period, mutually select a third licensed real estate broker (the Arbitrator) who has at least the same minimum qualifications as the Brokers, as described above. Each Broker shall submit to the Arbitrator his or her written determination of the Rent Adjustment, including reasonable documentation supporting such determination, and the Arbitrator shall, within thirty (30) days of his or her appointment, decide which Broker has most accurately determined the Rent Adjustment, which decision shall be final and binding on both Landlord and Tenant.
Landlord and Tenant shall each pay their own Brokers fees and costs, and shall equally share the entire cost of the Arbitrators fees and costs. In the event that the Rent Adjustment for the applicable 5-year extension term has not been determined for any reason by the commencement date of such extension term, Tenant shall continue to pay on an interim basis to Landlord the then-current Monthly Rental Installment as previously determined under this Lease until the written determination of the Rent Adjustment is made, at which time Tenant shall tender to Landlord within thirty (30) days of Landlords presentation of an invoice, the differential, if any, between the newly determined Rent Adjustment and the Monthly Rental Installment paid by Tenant on an interim basis.
B. Market Rent Adjustment. The Minimum Annual Rent for the applicable Extension Term shall be adjusted to reflect a new Minimum Annual Rent for the Leased Premises at the Fair Market Base Rent rate as reasonably determined pursuant to the terms of this Section 1(B). For this purpose, the Fair Market Base Rent rate shall mean the annual rate per rentable square foot for the 5-
year extension term equal to the annual base rent rates per rentable square foot then being charged for office/warehouse space in Dallas, Texas, in buildings of comparable size, age and quality in comparable arms-length renewal leases (taking into account any differences in comparison transactions in the location of the leased premises, creditworthiness of the tenant, rental concessions, tenant improvement allowances and other economic concessions, and the lease provisions regarding rent increases, real estate taxes and operating and utility costs of the property) for a 5-year term entered into within six months prior to the date Tenant exercises this option. In no event shall the Minimum Annual Rent during any Extension Term be less than the highest Minimum Annual Rent payable during the immediately preceding Lease Term. The monthly rent shall be an amount equal to one-twelfth (1/12) of the Minimum Annual Rent for the applicable Extension Term and shall be paid at the same time and in the same manner as provided in the Lease.
2. INITIAL EXPANSION OF LEASED PREMISES:
Provided that Tenant is then in compliance with the Conditions, any of which can be waived by Landlord in its sole discretion, effective as of the first day of the thirty-first (31st) month of the Lease Term (the Additional Premises Commencement Date), the square footage of the Leased Premises shall be expanded to include approximately 150,000 additional square feet of adjacent space (the Additional Premises), which space shall be located in the area shown on Exhibit F attached hereto. Such expansion shall be pursuant to the following terms and conditions.
Not later than thirty (30) days prior to the Additional Premises Commencement Date, Landlord and Tenant shall amend the Lease to include the Additional Premises and the Additional Premises shall become part of the Leased Premises on the terms and conditions set forth herein, subject to the following changes:
A. The Lease Term for the Additional Premises shall commence on the Additional Premises Commencement Date and shall be for a period of one hundred twenty-two (122) months. The initial Lease Term for the Leased Premises shall be extended for a period of thirty (30) months so as to terminate concurrently with the initial Lease Term for the Additional Premises.
B. The Minimum Annual Rent for the Additional Premises shall be paid by Tenant to Landlord as follows:
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Rental Installments |
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Months 31 66 of Lease Term |
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$3.18 per square foot of Rentable Area of the Additional Premises |
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Months 67 - 114 of Lease Term |
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$3.28 per square foot of Rentable Area of the Additional Premises |
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Months 115 - 152 of Lease Term |
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$3.44 per square foot of Rentable Area of the Additional Premises |
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As of the Additional Premises Commencement Date, the Minimum Annual Rent schedule set forth in Section 1.0ID and E of the Lease shall be amended to add the following:
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Rental Installments |
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Months 123 - 152 of Lease Term |
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$3.32 per square foot of Rentable Area of the Leased Premises |
C. Tenants Proportionate Share shall be amended to reflect the addition of the Additional Premises to the Leased Premises.
D. Except as otherwise agreed, no tenant improvement allowances or other such financial concessions contained in the Lease, if any, shall apply to the Additional Premises and Tenant shall accept the Additional Premises AS-IS without representation or warranty from Landlord of any kind, except
that the same representations and warranties from Landlord and maintenance and repair obligations of Landlord shall apply to the Additional Premises as apply to the Leased Premises. Notwithstanding the foregoing, it is agreed that the Additional Premises shall be delivered to Tenant in the condition set forth in the Building Description.
E. Prior to the Additional Premises Commencement Date, the parties shall determine the Rentable Area of the Additional Premises in the same manner as set forth in Section 1.01(B) of the Lease.
3. EXPANSION RIGHT:
Provided that Tenant is then in compliance with the Conditions, Tenant shall have the following rights during the term of the Lease, to expand the square footage of the Leased Premises in the Building:
A. First Expansion Space. Tenant shall have the right to expand into additional space in the Building adjacent to the Leased Premises and consisting of not less than 90,000 square feet and not more than 120,000 square feet (the First Expansion Space) upon delivery of written notice to Landlord of such election (Tenants Notice). Tenants Notice to expand into the First Expansion Space shall be delivered to Landlord on or before July 1, 2010 and shall specify the effective date of Tenants intended occupancy of the First Expansion Space (the First Expansion Occupancy Date). The First Expansion Occupancy Date shall be no earlier than January 1, 2011 and no later than March 1, 2012.
In the event Tenant timely notifies Landlord of its intent to expand into the First Expansion Space, Landlord shall, at its sole cost and expense, relocate any then existing tenant (or tenants) occupying the First Expansion Space to another space in the Building or in the Park such that Tenant shall have occupancy of the First Expansion Space by the First Expansion Occupancy Date. Prior to the First Expansion Occupancy Date, Landlord and Tenant shall amend the Lease to include the First Expansion Space on the same terms and conditions set forth in the Lease, and the First Expansion Space shall become part of the Leased Premises subject to the following changes:
(i) The term for the First Expansion Space shall be coterminous with the term for the Leased Premises; provided, however, that the term for the First Expansion Space shall be not less than ten (10) years. If the term of the First Expansion Space would then exceed the Lease Term for the Leased Premises, the Lease Term for the Leased Premises shall be extended automatically to the extent necessary, to be coterminous with the term for the First Expansion Space. The Minimum Annual Rent for the First Expansion Space shall be equal to the Fair Market Base Rent Rate, as determined in the manner set forth above, provided however, that in no event shall Tenants Minimum Annual Rent per square foot for the First Expansion Space be less than the highest Minimum Annual Rent per square foot payable during the Lease Term for the Leased Premises. If, as a result of Tenants exercise of its right to expand into the First Expansion Space, as set forth herein, the Lease Term for the Leased Premises is extended, then the Minimum Annual Rent for all of the Leased Premises during any such extended term shall be increased at a rate of two percent (2%) per annum through the remainder of the Lease Term
(ii) Tenants Proportionate Share shall be increased to reflect the increase in the rentable square footage of the Leased Premises.
(iii) Except as otherwise agreed, no tenant improvement allowances or other such financial concessions contained in the Lease, if any, shall apply to the First Expansion Space and Tenant shall accept the First Expansion Space AS-IS without representation or warranty from Landlord of any kind, except that the same representations and warranties from Landlord and maintenance and repair obligations of Landlord shall apply to the First Expansion Space as apply to the Leased Premises. Notwithstanding the foregoing, it is agreed that the First Expansion Space shall be delivered AS IS provided that the Second Expansion Space shall be in good repair and condition, with all systems being in good working order, and shall have a 36 clear stacking height.
B. Second Expansion Space. Tenant shall have the right to expand into additional space in the Building adjacent to the then existing Leased Premises and consisting of not less than 90,000 square feet and not more than 120,000 square feet (the Second Expansion Space) upon delivery of Tenants Notice to Landlord. Tenants Notice to expand into the Second Expansion Space shall be delivered to Landlord on or before July 1, 2012 and shall specify the effective date of Tenants intended occupancy of the Second Expansion Space (the Second Expansion Occupancy Date). The Second Expansion Occupancy Date shall be no earlier than January 1, 2013 and no later than March 1, 2014.
In the event Tenant timely notifies Landlord of its intent to expand into the Second Expansion Space, Landlord shall, at its sole cost and expense, relocate any then existing tenant (or tenants) occupying the Second Expansion Space to another space in the Building or in the Park such that Tenant
shall have occupancy of the Second Expansion Space by the Second Expansion Occupancy Date. Landlord and Tenant shall amend the lease to include the Second Expansion Space and the Second Expansion Space shall thereafter become part of the Leased Premises on the same terms and conditions set forth in the Lease, subject to the following changes:
(i) The term for the Second Expansion Space shall be coterminous with (i) the term for the First Expansion Space or (ii) ten (10) years, in the event Tenant failed to expand into the First Expansion Space. If the term of the Second Expansion Space would then exceed the Lease Term for the Leased Premises, the Lease Term for the Leased Premises shall be extended automatically to the extent necessary, to be coterminous with the term for the Second Expansion Space. The Minimum Annual Rent for the Second Expansion Space shall be equal to the Fair Market Base Rental Rate, provided, however, that in no event shall Tenants Minimum Annual Rent per square foot for the Second Expansion Space be less than the highest Minimum Annual Rent per square foot payable during the Lease Term for the Leased Premises. If, as a result of Tenants exercise of its right to expand into the Second Expansion Space, as set forth herein, the Lease Term for the Leased Premises is extended, then the Minimum Annual Rent for all of the Leased Premises during any such extended term shall be increased at a rate of two percent (2%) per annum through the remainder of the Lease Term.
(ii) Tenants Proportionate Share shall be increased to reflect the increase in the rentable square footage of the Leased Premises.
(iii) Except as otherwise agreed, no tenant improvement allowances or other such financial concessions contained in the Lease, if any, shall apply to the Second Expansion Space and Tenant shall accept the Second Expansion Space AS-IS without representation or warranty from Landlord of any kind, except that the same representations and warranties from Landlord and maintenance and repair obligations of Landlord shall apply to the First Expansion Space as apply to the Leased Premises. Notwithstanding the foregoing, it is agreed that the Second Expansion Space shall be delivered AS IS provided that the Second Expansion Space shall be in good repair and condition, with all systems being in good working order and shall have a 36 clear stacking height.
C. Third Expansion Space. Tenant shall have the right to expand into additional space in the Building adjacent to the then existing Leased Premises and consisting of not less than 90,000 square feet and not more than 120,000 square feet (the Third Expansion Space) upon delivery of Tenants Notice to Landlord. Tenants Notice to expand into the Third Expansion Space shall be delivered to Landlord on or before July 1, 2014 and shall specify the effective date of Tenants intended occupancy of the Third Expansion Space (the Third Expansion Occupancy Date). The Third Expansion Occupancy Date shall be no earlier than January 1, 2015 and no later than March 1, 2016.
In the event Tenant timely notifies Landlord of its intent to expand into the Third Expansion Space, Landlord shall, at its sole cost and expense, relocate any then existing tenant (or tenants) occupying the Third Expansion Space to another space in the Building or in the Park such that Tenant shall have occupancy of the Third Expansion Space by the Third Expansion Occupancy Date. Prior to the Third Expansion Occupancy Date, Landlord and Tenant shall amend the Lease to include the Third Expansion Space and the Third Expansion Space shall thereafter become part of the Leased Premises on the same terms and conditions set forth in the Lease, subject to the following changes:
(i) The term for the Third Expansion Space shall be coterminous with (i) the term for the First Expansion Space and the Second Expansion Space or (ii) ten (10) years, in the event Tenant failed to expand into the First Expansion Space and the Second Expansion Space. If the term of the Third Expansion Space would then exceed the Lease Term for the Leased Premises, the Lease Term for the Leased Premises shall be extended automatically to the extent necessary, to be coterminous with the term for the Third Expansion Space. The Minimum Annual Rent for the Third Expansion Space shall be equal to the Fair Market Base Rental Rate, provided, however, that in no event shall Tenants Minimum Annual Rent per square foot for the Third Expansion Space be less than the highest Minimum Annual Rent per square foot payable during the Lease Term for the Leased Premises. If, as a result of Tenants exercise of its right to expand into the Third Expansion Space, as set forth herein, the Lease Term for the Leased Premises is extended, then the Minimum Annual Rent for all of the Leased Premises during any such extended term shall be increased at a rate of two percent (2%) per annum through the remainder of the Lease Term.
(ii) Tenants Proportionate Share shall be increased to reflect the increase in the rentable square footage of the Leased Premises.
(iii) Except as otherwise agreed, no tenant improvement allowances or other such financial concessions contained in the Lease, if any, shall apply to the Third Expansion Space and Tenant shall accept the Third Expansion Space AS-IS without representation or warranty from Landlord of any
kind, except that the same representations and warranties from Landlord and maintenance and repair obligations of Landlord shall apply to the Third Expansion Space as apply to the Leased Premises. Notwithstanding the foregoing, it is agreed that the Third Expansion Space shall be delivered AS IS provided that the Third Expansion Space shall be in good repair and condition, with all systems being in good working order and shall have a 36clear stacking height.
D. In the event Tenant fails to provide Landlord with Tenants Notice by each applicable date set forth above, such failure shall be conclusively deemed a waiver of Tenants right to expand into the First Expansion Space, the Second Expansion Space or the Third Expansion Space, as applicable, without waiving Tenants right to expand into an Expansion Space for which Tenants exercise deadline has not then occurred, and Landlord shall be free to lease the applicable Expansion Space (starting with the easternmost portion of the Building) to a third party, subject to the Right of First Offer set forth in Section 4 below.
E. Tenants expansion rights as provided herein are personal to the Tenant named herein and shall become null and void upon the occurrence of an assignment of the Lease or a sublet of all or a part of the Leased Premises.
F. Notwithstanding anything contained in this Section 3 of the Special Stipulations, Landlord shall have the right to freely lease the First Expansion Space, the Second Expansion Space and the Third Expansion Space pursuant to terms and conditions solely satisfactory to Landlord. Landlord agrees that the term associated with any such leases shall not impair Tenants access to such spaces; provided that Tenant timely exercises its rights hereunder. Landlord agrees to retain relocation rights in any lease for space in the Building such that in the event Tenant elects to expand as provided herein, Landlord shall have the right to relocate such tenant as may be required in order to provide Tenant with the First Expansion Space, the Second Expansion Space or the Third Expansion Space, as applicable.
4. RIGHT OF FIRST OFFER ON VACANT SPACE IN THE BUILDING:
A. Notwithstanding anything to the contrary contained herein, provided that the Conditions are met, Tenant shall have a right of first offer (hereinafter the Right of First Offer) on any space in the Building consisting of a minimum of 90,000 to 120,000 square feet which becomes available at any time and from time to time during the term of this Lease (the Offer Space). Landlord shall notify Tenant in writing (Landlords Notice) of the availability of an Offer Space before entering into a lease with a third party for such Offer Space. Tenant shall have five (5) business days from its receipt of Landlords Notice to deliver to Landlord notice that Tenant has an interest in leasing such Offer Space and either agreeing to lease the Offer Space on the terms and conditions contained in Landlords Notice or requesting that Landlord negotiate with Tenant as to terms and conditions upon which Tenant would be agreeable to lease the Offer Space. In the event Tenant fails to notify Landlord within said five (5) business day period, such failure shall be conclusively deemed a waiver of Tenants Right of First Offer and a rejection of the Offer Space, whereupon Tenant shall have no further rights with respect to the Offer Space and Landlord shall be free to lease the Offer Space to a third party. In the event Tenant gives notice to Landlord that it desires to negotiate the terms and conditions of the Offer Space, the parties will have a period of fifteen (15) days during which they will negotiate in good faith the terms and conditions of the lease of the Offer Space. In the event the parties do not reach agreement on the terms and conditions of the lease of the Offer Space, within such fifteen (15) day period, such failure shall be conclusively deemed a waiver of Tenants Right of First Offer and a rejection of the Offer Space, whereupon Tenant shall have no further rights with respect to the Offer Space and Landlord shall be free to lease the Offer Space to a third party. In the event Tenant accepts the Offer Space on the terms and conditions specified in the Landlords Notice (or subsequently agreed to by Landlord and Tenant), the term for the Offer Space shall be coterminous with the term for the original Leased Premises; provided, however, that the term for the Offer Space shall be not less than five (5) years. If the term of the Offer Space would then exceed the Lease Term for the original Leased Premises, the Lease Term for the original Leased Premises shall be extended automatically to the extent necessary, to be coterminous with the term for the Offer Space. If, as a result of Tenants exercise of this Right of First Offer, the Lease Term for all of the Leased Premises is extended, the Minimum Annual Rent for the original Leased Premises during any such extended term shall be increased at a rate of two percent (2%) per annum through the remainder of the Lease Term.
B. If, pursuant to the terms and conditions hereof, Tenant accepts the Offer Space, then. Landlord and Tenant shall within thirty (30) days of such acceptance, amend the Lease to include the Offer Space subject to the same terms and conditions of the Lease, as modified by the terms and conditions of the Landlords Notice or Landlord and Tenants negotiations; provided, however, that except as otherwise expressly set forth in the Landlords Notice or agreed upon by the parties, no Tenant Improvement allowances or other such financial concessions contained in the Lease, if any, shall apply to the Offer Space.
C. The Right of First Offer to lease the Offer Space in the Building is personal to the Tenant named herein and shall become null and void upon the occurrence of an assignment of the Lease or a sublet of all or a part of the Leased Premises.
5. RIGHT OF FIRST OFFER TO PURCHASE BUILDING:
A. Provided that the Conditions are met, Landlord shall notify Tenant in writing (Landlords Notice) of its intent to sell the Building, before marketing the Building for sale or entering into a purchase and sale agreement with an unrelated third party for the Building. Tenant shall have five (5) business days from its receipt of Landlords Notice to deliver to Landlord written notice of its desire to purchase the Building. In the event Tenant gives notice to Landlord that it desires to purchase the Building and Tenant desires to negotiate the terms and conditions specified in Landlords notice, the parties will have a period of fifteen (15) days during which they will negotiate in good faith the terms and conditions of the purchase of the Building. In the event the parties do not reach agreement on the terms and conditions to purchase the Building within such fifteen (15) day period, such failure shall be conclusively deemed a waiver of Tenants right to purchase the Building, whereupon Tenant shall have no further rights with respect to purchasing the Building pursuant to this Section 5 and Landlord shall be free to sell the Building to a third party. In the event Tenant fails to notify Landlord of its acceptance within said five (5) business day period, such failure shall be conclusively deemed a waiver of Tenants right of first offer and a rejection of the Building, whereupon Tenant shall have no further rights with respect to the Building and Landlord shall be free to sell the Building to a third party. In the event Tenant agrees to purchase the Building on the terms and conditions specified in the Landlords Notice, Tenant and Landlord shall enter into a mutually satisfactory purchase and sale agreement within thirty (30) days of receipt of Landlords Notice.
B. This Right of First Offer to purchase the Building is personal to the Tenant named herein and shall become null and void upon the occurrence of an assignment of the Lease or a sublet of all or a part of the Leased Premises.
6. LANDLORD WARRANTIES:
A. Zoning: Landlord represents to Tenant that to Landlords actual knowledge, without independent inquiry, the use of the Leased Premises for the Permitted Use (as set forth in Section 1.01(J)) is allowed by the current zoning classification applicable to the Leased Premises as of the date of the Lease.
B. Title: Landlord represents and warrants to Tenant that Landlord is vested with fee simple title to the Building and the Land and has full right and lawful authority to lease the Leased Premises to Tenant pursuant to the terms hereof.
7. DETENTION PONDS:
With respect to the Detention Ponds shown and labeled on the Site Plan, the City of Coppell has issued a letter agreeing to assist Landlord in maintaining the water level, at a level to be determined as set forth in Exhibit J to the Lease. Landlord agrees to use reasonable good faith efforts to ensure that the City performs in accordance with such letter. In constructing such Detention Ponds, Landlord agrees that it will use a clay liner to assist in water retention.
8. SIGNAGE:
A. Tenant shall have the right, subject to Landlords prior written consent, such consent not to be unreasonably withheld, conditioned or delayed, to place the signs described in Subsection B below on the Building and on the monument signs, which signs may, at Tenants election, be the largest allowed by applicable code. Landlord shall have the right to approve the placing of any additional signs and the size and quality of the same. Landlord shall not place any exterior signs on the Building without the prior written consent of Tenant; provided, however, that if Tenant does not occupy 100% of the Building, Landlord shall have the right to place signs within 450 feet from the East end of the Building. Any signs not in conformity with the Lease may be immediately removed by Landlord.
B. Tenant, at Tenants sole cost and expense, shall have the exclusive right to install one (1) Building-mounted identification sign (a representation or sample of which sign is depicted on Exhibit G hereto), which shall include Tenants name and logo, on the west parapet wall at the top of the Building, and the exclusive right to place lettering on the monument sign facing Freeport Parkway in the location shown on the Site Plan. Landlord shall not be permitted to install any additional monument signs or other signs (other than traffic or directional signage) within the Prohibited Area shown on Exhibit A-3 attached
hereto. Upon the commencement of the term of the Additional Premises, Tenant shall have the right, at its sole cost and expense and subject to applicable City codes, to install a second Building-mounted identification sign, which shall include Tenants name and logo, on the North or South parapet wall at the top of the Building. As of the date that Tenant occupies the entire Building, Tenant shall have the right, at its sole cost and expense, to install a third Building-mounted identification sign, which shall include Tenants name and logo, on either the north or the south parapet wall at the top of the Building. In addition to the foregoing, Landlord shall, at Landlords sole cost and expense, paint or otherwise apply Tenants identification sign of approximately thirty-foot (30) high letters, and including Tenants name and/or logo on the roof of the Leased Premises. No other signage shall be placed on the roof of the Leased Premises.
C. All signage referred to herein and the installation thereof shall comply with all laws, regulations and ordinances affecting the Building and the Common Areas. Without limiting the foregoing, Tenant specifically acknowledges and agrees that Tenant shall be solely responsible for ensuring that all of the signs installed by or on behalf of Tenant comply with all applicable laws, regulations and ordinances, and that any failure by Tenant to comply with any such laws or regulations, (including, without limitation, obtaining any approvals therein required) shall be at Tenants sole risk and expense. The location, materials, coloring, lettering, lighting and method of installation of any signs shall be subject to Landlords prior approval, which approval shall not be unreasonably withheld. Approval of Tenants signage by Landlord shall be deemed approval under the Declaration; provided that at such time the Landlord named herein is the declarant under the terms of the Declaration.
D. Tenant shall pay (as Additional Rent) for all costs and expenses of repairing and maintaining all signs installed by or on behalf of Tenant. On or before the expiration or earlier termination of this Lease, Tenant shall be responsible for removing the Building-mounted identification signs and the lettering on the monument sign and returning the Building and the surrounding premises to their original condition, ordinary cosmetic wear and tear excepted. Tenant shall place no other signage on the exterior of the Leased Premises without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed. Landlord shall not place any signage on or above the Leased Premises. Any signs not in conformity with the Lease may be immediately removed by Landlord.
9. LEASE CONTINGENCY:
It is acknowledged and agreed that Tenant shall have the right, at its option, to terminate this Lease upon written notice thereof to Landlord, in the event that, on or before January 1, 2003, Landlord has not obtained from the City of Coppell a formal tax abatement agreement or Section 380 agreement documenting the City of Coppells agreement to provide the economic incentives shown on that certain letter from the City of Coppell to Landlord as set out in Exhibit K to the Lease, which agreement shall be in form reasonably acceptable to Landlord and Tenant.
In the event Tenant has not exercised its right to terminate this Lease pursuant to this Section 10 on or before January 15,2003, then Tenants right to terminate this Lease as aforesaid shall be deemed null and void and of no further force or effect.
10. RUBY ROAD PARK:
Landlord and Tenant agree to cooperate and work in good faith to cause the City of Coppell to clean up and enhance the immediate adjacent land across the street from the Project on the North side of Ruby Road into passive open space. Landlord and Tenant will collaborate with the City relative to such improvements and an ongoing maintenance program for such area until the same may be otherwise developed or Landlord conveys such property to an unaffiliated third party.
11. LANDLORDS LEASE CONTINGENCIES:
A. Landlords obligations under this Lease are expressly conditioned on Tenants chief financial officer certifying to Landlord as of the date on which Landlord would revise site plans per staff comments as specified on the Project Schedule (the Construction Condition Date) that (i) Tenants net worth on such date is not materially less than Tenants net worth as reflected on Tenants Financial Statements dated June 30, 2002; and (ii) during the time period from June 30, 2002 through the date of such certification, Tenant has realized positive net income; and (iii) Tenant is not currently in default under any terms of any debt instruments to which it is subject; and (iv) that the $15 million bank line of credit with Bank One has been extended to expire not earlier than May 1, 2004 and in an amount not less than the current line of credit (collectively, the Construction Conditions).
The parties agree that in the event the Construction Conditions have not been satisfied as of the Construction Condition Date, Landlord shall have no obligation to undertake any further activities as set out in the Project Schedule or to expend funds relating to this Lease or the design and construction
of the Building or the Project until such time as the Construction Conditions have been satisfied (to the extent Landlord does not undertake further activities as set out in the Project Schedule, Tenant may also suspend its related activities under the Project Schedule), and, if the Construction Conditions have not been satisfied within thirty (30) days after the Construction Condition Date, the Project Schedule (and the Target Commencement Date) shall be extended for the period of the actual delay caused by such delay in the satisfaction of the Construction Conditions until the Construction Conditions have been satisfied.
In addition, Landlords obligations under this Lease are expressly conditioned on Tenants chief financial officer certifying to Landlord on or before March 1, 2003 that Tenant has obtained a loan commitment letter from a recognized financial institution pursuant to which Tenants current $14 Million debt will be refinanced on terms commercially reasonable relative to Tenants then-current cash flow projections (the Loan Condition). Tenants certification to Landlord of the satisfaction of the Loan Condition shall be accompanied by a copy of the loan commitment letter.
The parties agree that in the event the Loan Condition has not been satisfied as of March 1, 2003, Landlord shall have no obligation to undertake any further activities as set out in the Project Schedule or to expend funds relating to this Lease or to the design and construction of the Building or the Project until such time as the Loan Condition has been satisfied (to the extent Landlord does not undertake further activities set out in the Project Schedule, Tenant may also suspend its related activities under the Project Schedule), and the Project Schedule (and the Target Commencement Date) shall be extended for the period of the actual delay caused by such delay in the satisfaction of the Loan Condition until the Loan Condition has been satisfied.
It is acknowledged and agreed that Landlord shall have the right, at its option, to terminate this Lease upon written notice thereof to Tenant in the event that, as of April 1, 2003, Landlord has not obtained reasonably sufficient evidence that all of the Construction Conditions and the Loan Condition have been satisfied. In the event of termination by Landlord, neither party shall have any further obligations to the other under this Lease, except those which survive termination hereof. If Landlord has not exercised its right to terminate this Lease under this Section 11A on or before the date that all of the Construction Conditions and the Loan Condition have been satisfied, Landlords right to terminate shall become null and void and the provisions of this Section 11A shall have no further force or effect.
B. Landlords obligations under this Lease are expressly conditioned on Landlord receiving sufficient evidence, in Landlords sole discretion, that the City of Coppell will sell and transfer those certain parcels of land shown as the crosshatched areas on Exhibit L to Landlord and that the City of Coppell will construct and complete, at its cost and expense, on or before the Commencement Date, the realignment of Ruby Road as shown on the Site Plan. Landlord agrees to use good faith efforts and reasonable diligence to timely satisfy this condition.
It is acknowledged and agreed that Landlord shall have the right, at its option, to terminate this Lease upon written notice thereof to Tenant, in the event that, on or before January 1, 2003, Landlord has not obtained sufficient evidence from the City of Coppell that the City of Coppell will transfer the land referenced above and will construct and complete, at its cost and expense, on or before the Commencement Date, the realignment of Ruby Road as shown on the Site Plan. In the event of termination by Landlord, neither party shall have any further obligations to the other under this Lease, except those which survive termination thereof. If Landlord has not exercised its right to terminate the this Lease under this Section 11B on or before February 15, 2003, Landlords right to terminate shall become null and void and the provisions of this Section 11B shall have no further force and effect.
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT TO LEASE (hereinafter referred to as the First Amendment) is made as of this 2nd day of May 2005, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership as successor-in-interest to Texas Dugan Limited Partnership (hereinafter referred to as Landlord) and THE CONTAINER STORE, a Texas corporation (hereinafter referred to as Tenant).
WITNESSETH:
WHEREAS, Texas Dugan Limited Partnership and Tenant entered into that certain Office, Warehouse and Distribution Center Lease Agreement dated October 8, 2002, and as assigned by Texas Dugan Limited Partnership to Duke Realty Limited Partnership by that certain Assignment and Assumption of Lease dated December 6, 2002 (hereinafter collectively referred to as the Lease) for the lease of approximately 653,500 square feet of space, located in a building commonly known as Freeport X (the Building) located at 500 Freeport Parkway, Coppell Texas 75019 (hereinafter the Leased Premises), and within Freeport North (the Park), which space is more particularly described in the Lease; and
WHEREAS, Duke Realty Limited Partnership succeeded to the interest of the landlord under the Lease and is the Landlord with respect to the Leased Premises; and
WHEREAS, Landlord and Tenant desire to amend the Lease in order to modify the Expansion paragraphs upon the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration paid by Landlord and Tenant to one another, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows:
1. Incorporation of Recitals. The above recitals are hereby incorporated into this Amendment as if fully set forth herein.
2. Amendment of Exhibit D. Special Stipulations. The following paragraphs of Exhibit D, Special Stipulations to the Lease are hereby amended as follows:
(a) 3. EXPANSION RIGHT:
A. First Expansion Space. The first paragraph of Section 3(A) of the Special Stipulations to the Lease is deleted in its entirety:
Tenant shall have the right to expand into additional space in the Building adjacent to the Leased Premises and consisting of not less than 90,000 square feet and not more than 120,000 square feet (the First Expansion Space) upon delivery of written notice to Landlord of such election (Tenants Notice). Tenants Notice to expand into the First Expansion Space shall be delivered to Landlord on or before July 1, 2010 and shall specify the effective date of Tenants intended occupancy of the First Expansion Space (the First Expansion Occupancy Date). The First Expansion Occupancy Date shall be no earlier than January 1, 2011 and no later than March 1, 2012.
and replaced with the following:
Tenant shall have the right to expand into additional space in the Building adjacent to the Leased Premises and consisting of not less than 90,000 square feet and not more than 152,035 square feet (the First Expansion Space) upon delivery of written notice to Landlord of such election (Tenants Notice). Tenants Notice to expand into the First Expansion Space shall be delivered to Landlord on or before November 1, 2010 and shall specify the effective date of Tenants intended occupancy of the First Expansion Space (the First Expansion Occupancy Date). The First Expansion Occupancy Date shall be no earlier than May 1, 2011 and no later than July 1, 2012.
B. Second Expansion Space. The first paragraph of Section 3(B) of The Special Stipulations to the Lease is deleted in its entirety:
Tenant shall have the right to expand into additional space in the Building adjacent to the then existing Leased Premises and consisting of not less than 90,000 square feet and not more than 120,000 square feet (the Second Expansion Space) upon delivery of Tenants Notice to Landlord. Tenants Notice to expand into the Second Expansion Space shall be delivered to Landlord on or before July 1, 2012 and shall specify the effective date of Tenants intended occupancy of the Second Expansion Space (the Second Expansion Occupancy Date). The Second Expansion Occupancy Date shall be no earlier than January 1, 2013 and no later than March 1, 2014.
And replaced with the following:
Tenant shall have the right to expand into additional space in the Building adjacent to the then existing Leased Premises and consisting of not less than 90,000 square feet and not more than 145,965 square feet (the Second Expansion Space) upon delivery of Tenants Notice to Landlord. Tenants Notice to expand into the Second Expansion Space shall be delivered to Landlord on or before May 1, 2015 and shall specify the effective date of Tenants intended occupancy of the Second Expansion Space (the Second Expansion Occupancy Date). The Second Expansion Occupancy Date shall be no earlier than November 1, 2015 and no later than January 1, 2017.
Section 3(B) is further amended by inserting the following as the last paragraph of Section 3(B):
In the event Tenant needs additional space anytime between January 1, 2013 and November 1, 2015 and the Second Expansion Space is not then available for lease by Tenant, Tenant shall give Landlord notice of its desire to lease up to 120,000 square feet and shall specify the effective date of Tenants occupancy (the Temporary Expansion Date). Landlord shall use commercially reasonable efforts to make available to Tenant up to 120,000 square feet of storage space owned by Landlord in the Building or in another building owned by Landlord for the period from the Temporary Expansion Date through November 1, 2015. In the event that Landlord does not have any space available in the Building or in another building owned by Landlord for such period of time when Tenant needs such space, Landlord shall cooperate to represent Tenant to locate a space of similar size in a building not owned by Landlord.
C. Third Expansion Space. The first paragraph of Section 3(C) is deleted in its entirety
Tenant shall have the right to expand into additional space in the Building adjacent to the then existing Leased Premises and consisting of the remainder of the entire space (the Third Expansion Space) upon delivery of Tenants Notice to Landlord. Tenants Notice to expand into the Third Expansion Space shall be delivered to Landlord on or before July 1, 2014 and shall specify the effective date of Tenants intended occupancy of the Third Expansion Space (the Third Expansion Occupancy Date). The Third Expansion Occupancy Date shall be no earlier than January 1, 2015 and no later than March 1, 2016.
And replaced with the following:
In the event Tenant has not leased all of the space in the Building by Tenants exercise of its rights with regard to the First Expansion Space and the Second Expansion Space, Tenant shall have the right to expand into all of the remaining space in the Building (but not a portion thereof) (the Third Expansion Space) upon delivery of Tenants Notice to Landlord. Tenants Notice to expand into the Third Expansion Space shall be delivered to Landlord on or before May 1, 2018 and shall specify the effective date of Tenants intended occupancy of the Third Expansion Space (the Third Expansion Occupancy Date). The Third Expansion Occupancy Date shall be no earlier than November 1, 2018 and no later than November 1, 2019.
(b) LEASE CONTINGENCY. Section 9 of the Special Stipulations is deleted in its entirety and is of no further force or effect.
3. Except as expressly modified by this First Amendment, all provisions, terms and conditions of the Lease shall remain in full force and effect.
4. In the event a provision of this First Amendment conflicts with a provision of the Lease, this First Amendment shall supersede and control.
5. All terms and phrases used herein shall have the same meaning as assigned to them in the Lease.
6. This First Amendment shall not be of any legal effect or consequence unless signed by Landlord and Tenant, and once signed by Landlord and Tenant it shall be binding upon and inure to the benefit of Landlord, Tenant, and their respective legal representatives, successors and assigns.
7. This First Amendment has been executed and shall be construed under the laws of the State of Texas.
IN WITNESS WHEREOF, the undersigned have caused this First Amendment to be executed under seal and delivered as of the day and year first above written.
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LANDLORD: | |||
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By: |
DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership, its Manager | ||
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By: |
DUKE REALTY CORPORATION, an Indiana corporation, its General Partner | |
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By: |
/s/ Jeffrey D. Turner |
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Name: |
Jeffrey D. Turner |
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Title: |
SVP |
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TENANT: | |||
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THE CONTAINER STORE, INC., a Texas corporation | |||
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By: |
/s/ Valerie Richardson |
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Name: |
Valerie Richardson |
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Title: |
Vice President |
END OF EXECUTION SIGNATURES
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (hereinafter referred to as the Second Amendment) is made as of this 23 day of November 2005, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership as successor-in-interest to Texas Dugan Limited Partnership (hereinafter referred to as Landlord) and THE CONTAINER STORE, a Texas corporation (hereinafter referred to as Tenant).
WITNESSETH:
WHEREAS, Texas Dugan Limited Partnership and Tenant entered into that certain Office, Warehouse and Distribution Center Lease Agreement dated October 8, 2002, and as assigned by Texas Dugan Limited Partnership to Duke Realty Limited Partnership by that certain Assignment and Assumption of Lease dated December 6, 2002, and as further amended by that certain First Amendment to Lease dated May 2, 2005 (hereinafter collectively referred to as the Lease) for the lease of approximately 653,500 square feet of space, located in a building commonly known as Freeport X (the Building) located at 500 Freeport Parkway, Coppell Texas 75019 (hereinafter the Original Leased Premises), and within Freeport North (the Park), which space is more particularly described in the Lease; and
WHEREAS, Duke Realty Limited Partnership succeeded to the interest of the landlord under the Lease and is the Landlord with respect to the Leased Premises; and
WHEREAS, Landlord and Tenant desire to (i) arrange for the temporary use of approximately 150,000 rentable square feet (the Additional Premises) through August 1, 2006; and (ii) provide for the permanent expansion into the Additional Premises and extension of the term of the Original Leased Premises in accordance with the provisions of paragraph 2 of Exhibit D to the Lease; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of the Lease to reflect such expansion and extension and any other changes to the Lease.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants herein contained and each act performed hereunder by the parties, Landlord and Tenant hereby enter into this Second Amendment.
1. Incorporation of Recitals. The above recitals are hereby incorporated into this Second Amendment as if fully set forth herein.
2. Amendment of Article 1. Basic Lease Provisions and Definitions. Effective as of October 21, 2005 (the Temporary Expansion Commencement Date) through August 31, 2006 the following paragraphs of Article 1, Section 1.01 of the Lease are hereby amended as follows:
A. Leased Premises. Suite 100 consisting of approximately 803,500 square feet of that certain building consisting of approximately 1,101,500 square feet at 500 Freeport Parkway, Coppell, Texas (the Building), which Building is situated on that certain tract or parcel of land containing approximately 49.6 acres as more particularly described on Exhibit A-l attached to the Lease (the Land), located in Freeport North (the Park). The Leased Premises, the Building and the Land are sometimes collectively referred to as the Project. The preliminary lease outline drawing of the Leased Premises and the Additional Premises is set forth on the site plan of the Project attached hereto as Amended Exhibit A (the Site Plan). Collectively, the Original Premises and Additional Premises shall hereinafter be referred to as the Leased Premises.
B. Rentable Area of Additional Premises: approximately 150,000 rentable square feet;
C. Tenants Proportionate Share with respect to 90,000 rentable square feet of the Additional Premises: 8.171%.
(Note: Tenant to pay Operating Expenses with respect to only 90,000 rentable square feet.)
D. Minimum Annual Rent for Additional Premises:
10/21/2005 08/31/2006 |
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$ |
232,983.87 |
* |
*represents 10.3 months
E. Monthly Rental Installments for Additional Premises:
10/21/2005 10/31/2005 |
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$ |
7,983.87 |
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11/01/2005 08/31/2006 |
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$ |
22,500.00 |
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F. Term: The Term of the Lease with respect to the Additional Premises shall be effective as of October 21, 2005 and continue until midnight on August 31, 2006.
Except to the extent modified pursuant to the foregoing items A through E, the remaining terms and provisions of Section 1.01 of the Lease, to the extent not inconsistent with the foregoing, shall remain in full force and effect.
3. As Is Condition. Tenant has personally inspected the Additional Premises and accepts the same AS IS without representation or warranty by Landlord of any kind, except that the same representations and warranties from Landlord and maintenance and repair obligations of Landlord shall apply to the Additional Premises as apply to the Leased Premises. Tenant shall occupy the Additional Premises, but shall only pay Monthly Rental Installments and Operating Expenses on 90,000 rentable square feet thereof.
4. Tenant shall pay the cost of all utilities serving the Additional Premises.
5. Amendment of Article 1. Basic Lease Provisions and Definitions. Commencing September 1, 2006 (the Additional Premises Commencement Date) through the following paragraphs of Article 1, Section 1.01 of the Lease are hereby amended as follows:
B. Rentable Area of the Original Leased Premises: approximately 653,500 square feet; Rentable Area of the Additional Premises: approximately 150,000 square feet; Rentable Are of the Leased Premises: 803,500 square feet.
C. Tenants Proportionate Share: 72.95%
D. Minimum Annual Rent:
Months 31 50 |
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$2.93 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.10B above |
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Months 51 66 |
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$3.00 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.10B above |
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Months 67 74 |
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$3.02 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.10B above |
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Months 75 98 |
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$3.09 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.10B above |
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Months 99 114 |
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$3.21 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.10B above |
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Months 115 122 |
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$3.24 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.10B above |
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Months 123 152 |
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$3.34 per annum per square foot of Rentable Area of the Leased Premises as established pursuant to the provisions of Section 1.10B above |
E. Monthly Rental Installments:
Months 31 50 |
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$ |
196,045.42 |
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Months 51 66 |
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$ |
200,946.67 |
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Months 67 74 |
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$ |
202,196.67 |
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Months 75 98 |
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$ |
207,097.92 |
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Months 99 114 |
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$ |
214,722.08 |
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Months 115 122 |
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$ |
216,722.08 |
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Months 123 152 |
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$ |
223,801.67 |
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G. Term: The Term of the Lease shall be extended through October 31, 2016.
Except to the extent modified pursuant to the foregoing items B through E, the remaining terms and provisions of Section 1.01 of the Lease, to the extent not inconsistent with the foregoing, shall remain in full force and effect.
6. Amendment of Exhibit D to the Lease. Paragraph 2.D of Exhibit D to the Lease is hereby deleted in its entirety and replaced with the following:
D. Except as otherwise agreed, no tenant improvement allowances or other such financial concessions contained in the Lease, if any, shall apply to the Additional Premises and Tenant shall accept the Additional Premises AS-IS without representation or warranty from Landlord of any kind, except that the same representations and warranties from Landlord and maintenance and repair obligations of Landlord shall apply to the Additional Premises as apply to the Leased Premises. Notwithstanding the foregoing, it is agreed that the Additional Premises shall be delivered to Tenant on the Additional Premises Commencement Date in the condition set forth in the Building Description. Within sixty (60) days prior to commencement of construction of the Additional Premises, Landlord shall prepare and submit to Tenant a set of construction drawings (the Revised Building CDs) covering all work to be performed by Landlord in constructing and installing improvements to the Building shell and all leasehold improvements within the Additional Premises as set forth in the Building Description. Tenant shall review the Revised Building CDs or any portions thereof submitted to Tenant and shall provide Landlord with written notice of Tenants approval or requested changes by way of a Change Order pursuant to the terms set forth in Section 2.02.E of the Lease. Tenant shall be responsible for the costs to construct such improvements which were not part of the Building Description and shall reimburse Landlord as set forth in Section 2.02.E of the Lease.
7. Except as expressly modified by this Second Amendment, all provisions, terms and conditions of the Lease shall remain in full force and effect.
8. In the event a provision of this Second Amendment conflicts with a provision of the Lease, this Second Amendment shall supersede and control.
9. All terms and phrases used herein shall have the same meaning as assigned to them in the Lease.
10. This Second Amendment shall not be of any legal effect or consequence unless signed by Landlord and Tenant, and once signed by Landlord and Tenant it shall be binding upon and inure to the benefit of Landlord, Tenant, and their respective legal representatives, successors and assigns.
11. This Second Amendment has been executed and shall be construed under the laws of the State of Texas.
[Execution signatures contained on the following page]
IN WITNESS WHEREOF, the undersigned have caused this Second Amendment to be executed under seal and delivered as of the day and year first above written.
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LANDLORD: | |||
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By: |
DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership, its Manager | ||
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By: |
DUKE REALTY CORPORATION, an Indiana corporation, its General Partner | |
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By: |
/s/ Jeffrey D. Turner |
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Name: |
Jeffrey D. Turner |
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SVP |
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TENANT: | |||
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THE CONTAINER STORE, INC., a Texas corporation | |||
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By: |
/s/ Valerie Richardson |
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Name: |
Valerie Richardson |
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Vice President |
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ATTEST: |
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By: |
/s/ Rebecca L. Como |
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Name: |
Rebecca L. Como |
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Real Estate Assistant |
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[Corporate Seal] |
END OF EXECUTION SIGNATURES
August 7, 2007
Ms. Cindy Luttrell
Lease Administration Manager
The Container Store
500 Freeport Parkway
Coppell, TX 75019-3863
Re: THIRD AMENDMENT TO LEASE
Dear Cindy:
Enclosed you will find three (3) fully executed originals of the Third Amendment to Lease document, signed by The Container Store and Duke Realty Corporation.
As always, should you have any questions please do not hesitate to call.
Sincerely,
DUKE REALTY CORPORATION
/s/ Jeff D. Thornton |
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Jeff D. Thornton |
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Senior Vice President of Operations |
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Cc: Ann Dee, Duke Legal |
14241 N. Dallas Parkway |
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Atlanta |
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Cleveland |
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Indianapolis |
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Phoenix |
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Tampa |
Suite 1000 |
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Baltimore |
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Columbus |
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Minneapolis |
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Raleigh |
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Washington DC |
Dallas, TX 75254 |
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Chicago |
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Dallas |
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Nashville |
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St. Louis |
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972.361.6700 |
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Cincinnati |
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Houston |
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Orlando |
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South Florida |
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www.dukerealty.com |
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THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE (hereinafter referred to as the Third Amendment) is made as of this 7th day of August 2007, by and between DUKE REALTY LIMITED PARTNERSHIP, an Indiana limited partnership as successor-in-interest to Texas Dugan Limited Partnership (hereinafter referred to as Landlord) and THE CONTAINER STORE, a Texas corporation (hereinafter referred to as Tenant).
WITNESSETH:
WHEREAS, Texas Dugan Limited Partnership and Tenant entered into that certain Office, Warehouse and Distribution Center Lease Agreement dated October 8, 2002, and as assigned by Texas Dugan Limited Partnership to Duke Realty Limited Partnership by that certain Assignment and Assumption of Lease dated December 6, 2002, and as further amended by that certain First Amendment to Lease dated May 2, 2005, and that certain Second Amendment to Lease dated November 23, 2005 (hereinafter collectively referred to as the Lease) for the lease of approximately 803,500 square feet of space, located in a building commonly known as Freeport X (the Building) located at 500 Freeport Parkway, Coppell Texas 75019 (hereinafter the Leased Premises), and within Freeport North (the Park), which space is more particularly described in the Lease; and
WHEREAS, Duke Realty Limited Partnership succeeded to the interest of the landlord under the Lease and is the Landlord with respect to the Leased Premises; and
WHEREAS, Landlord and Tenant desire to reduce the amount of the Security Deposit being held by Landlord; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of the Lease to reflect such reduction and any other changes to the Lease.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants herein contained and each act performed hereunder by the parties, Landlord and Tenant hereby enter into this Third Amendment.
1. Incorporation of Recitals. The above recitals are hereby incorporated into this Third Amendment as if fully set forth herein.
2. Amendment of Article 4. Security Deposit. Article 4 (i) of the Lease is hereby deleted in its entirety and replaced with the following:
(i) Provided that the Conditions are satisfied such that Tenant is entitled to a reduction in the amount of the Security Deposit, then, upon written request from Tenant at the end of the thirty-eighth (38th) month of the Lease Term, the amount of the Security Deposit required to be maintained by Tenant hereunder may be reduced to One Hundred Thousand Dollars ($100,000.00). In the event that Tenant is entitled to the reduction in the amount of the Security Deposit as provided in this subparagraph, then, either (a) Landlord shall promptly refund to Tenant the excess balance of the Security Deposit (in the event of a cash deposit), or (b) Tenant shall provide Landlord with a replacement for the Letter of Credit (in the same form as the original Letter of Credit) reflecting the reduced amount and Landlord, only after receipt of the replacement for the Letter of Credit in compliance with the terms of this Article 4, shall return the original Letter of Credit in the greater amount to Tenant; and
3. Letter of Credit Reduction. Landlord hereby affirms that Tenant has so requested the reduction of Tenants cash Security Deposit and that the Conditions specified in the Article 4 (as amended above) have been met. Landlord agrees to deliver to Tenant $100,000 of Tenants cash Security Deposit within 30 days of execution of this Third Amendment. All other provisions of Article 4 remain in full force and effect.
4. Incorporation. Except as expressly modified by this Third Amendment, all provisions, terms and conditions of the Lease shall remain in full force and effect.
5. Conflict. In the event a provision of this Third Amendment conflicts with a provision of the Lease, this Third Amendment shall supersede and control.
6. Definitions. All terms and phrases used herein shall have the same meaning as assigned to them in the Lease.
7. Examination of this Amendment. This Third Amendment shall not be of any legal effect or consequence unless signed by Landlord and Tenant, and once signed by Landlord and Tenant it shall be binding upon and inure to the benefit of Landlord, Tenant, and their respective legal representatives, successors and assigns.
8. Choice of Law. This Third Amendment has been executed and shall be construed under the laws of the State of Texas.
IN WITNESS WHEREOF, the undersigned have caused this Third Amendment to be executed under seal and delivered as of the day and year first above written.
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LANDLORD: | |||
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DUKE REALTY LIMITED PARTNERSHIP, | |||
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By: |
DUKE REALTY CORPORATION, an | ||
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Indiana corporation, its General Partner | ||
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By: |
/s/ Jeffrey D. Turner | |
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Jeffrey D. Turner | |
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Senior Vice President | |
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TENANT: | |||
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THE CONTAINER STORE, INC., | |||
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a Texas corporation | |||
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/s/ Valerie Richardson | ||
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Name: |
Valerie Richardson | ||
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Title: |
Vice President | ||
FOURTH AMENDMENT TO LEASE
THIS FOURTH AMENDMENT TO LEASE (hereinafter referred to as the Fourth Amendment) is executed as of the 24th day of August 2011, by and between DUKE SECURED FINANCING 2009-1ALZ, LLC, a Delaware limited liability company, as successor in interest to Duke Realty Limited Partnership, an Indiana limited partnership, as successor-in-interest to Texas Dugan Limited Partnership (hereinafter referred to as Landlord) and THE CONTAINER STORE, INC., a Texas corporation (hereinafter referred to as Tenant).
WITNESSETH:
WHEREAS, Landlord and Tenant entered into that certain Office, Warehouse and Distribution Center Lease Agreement dated October 8, 2002, as amended by that certain First Amendment to Lease dated May 2, 2005 (First Amendment), that certain Second Amendment to Lease dated November 23, 2005, and that certain Third Amendment to Lease dated August 7, 2007 (hereinafter collectively referred to as the Lease) for the lease of approximately 803,500 square feet of space, located in a building commonly known as Freeport X (the Building) located at 500 Freeport Parkway, Coppell Texas 75019 (hereinafter the Leased Premises), and within Freeport North (the Park), which space is more particularly described in the Lease; and
WHEREAS, Duke Secured Financing 2009-1ALZ, LLC, succeeded to the interest of the landlord under the Lease and is the Landlord with respect to the Leased Premises; and
WHEREAS, Landlord and Tenant desire to amend certain provisions of the Lease with respect to the Second Expansion Space and Third Expansion Space;
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants herein contained and each act performed hereunder by the parties, Landlord and Tenant hereby agree that the Lease is amended as follows:
1. Incorporation of Recitals. The above recitals are hereby incorporated into this Fourth Amendment as if fully set forth herein.
2. Amendment of Section 1.01. Basic Lease Provisions and Definitions. Subsection L of Section 1.01 of the Lease is hereby deleted in its entirety and the following is substituted in lieu thereof:
Address for notices and payments are as follows:
Landlord: |
Duke Secured Financing 2009-1ALZ, LLC |
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c/o Duke Realty Corporation |
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Attn: Texas Market - Vice President, Property Management |
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14241 Dallas Parkway, Suite 1000 |
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Dallas, TX 75254 |
With a |
Duke Secured Financing 2009-1ALZ, LLC |
Copy to: |
c/o Duke Realty Corporation |
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Attn: Texas Market Attorney |
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14241 Dallas Parkway, Suite 1000 |
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Dallas, TX 75254 |
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Duke Secured Financing 2009-1ALZ, LLC |
Payments to: |
75 Remittance Drive, Suite 1175 |
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Chicago, IL 60675-1175 |
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Tenant: |
The Container Store, Inc. |
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500 Freeport Parkway |
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Coppell, TX 75019 |
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Attn: Chief Financial Officer |
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Copies to: |
The Container Store, Inc. |
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500 Freeport Parkway |
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Coppell, TX 75019 |
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Attn: Vice President of Real Estate |
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And: |
Smith, Robertson, Elliott, Glen, Klein & Douglas, L.L.P. |
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221 West Sixth Street, Suite1100 |
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Austin, TX 78701 |
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Attn: Michael L. Robertson, Esq. |
3. Amendment of Article 16. Miscellaneous. Article 16 of the Lease is hereby amended as follows:
(a) Section 16.16, ERISA, is hereby deleted in its entirety and shall be of no further force or effect.
(b) The following section is incorporated herein, effective as of the date hereof:
Section 16.20. Patriot Act. Each of Landlord and Tenant, each as to itself, hereby represents (i) that it is not on the Specially Designated Nationals List published by the United States Treasury Departments Office of Foreign Assets Control and (ii) that it is not, to its knowledge, a person otherwise identified by government or legal authority as a person with whom a U.S. Person is prohibited from transacting business. As of the date of the Fourth Amendment, a list of such designations and the text of the Executive Order are published under the internet website address www.ustreas.gov/offices/enforcement/ofac. Nothing in this Section 16.20 creates an ongoing obligation between the parties to disclose or update any such information.
4. Amendment of Exhibit D. Special Stipulations.
(a) Exhibit D of the Lease is hereby amended by deleting Section 3.B., Second Expansion Space, in its entirety.
(b) Section 4.A. of Exhibit D, Right of First Offer on Vacant Space in the Building, is hereby amended by deleting the first sentence and substituting the following in lieu thereof:
Notwithstanding anything to the contrary contained herein, provided that the Conditions are met, Tenant shall have a right of first offer (hereinafter the Right of First Offer) on each entire vacant suite (but not a portion of a suite) in the Building (consisting of either Suite 200 or Suite 300 and shown cross-hatched on the attached Exhibit N), which becomes available at any time and from time to time during the term of this Lease (the Offer Space).
Section 4.A. of Exhibit D is hereby further amended by adding the following to the end of the paragraph:
If Tenant declines the Right of First Offer or otherwise fails to exercise such right, but Landlord does not enter into a lease with a third party within one hundred eighty (180) days after Tenant declines or fails to exercise its Right of First Offer, or if Landlord enters into a lease for one year or less for the Offer Space, Landlord shall be required to present the Offer Space to Tenant pursuant to this Section 4.A. in the same manner that the original Landlords Notice was submitted to Tenant.
(c) Section 3.C. of Exhibit D, Third Expansion Space, is hereby amended by deleting the first sentence and substituting the following in lieu thereof:
Tenant shall have the right to expand into additional space in the Building containing approximately 145,965 rentable square feet known as Suite 200 and shown cross-hatched on Exhibit O attached hereto and made a part hereof (Third Expansion Space) upon delivery of Tenants Notice to Landlord.
Section 3.C. of Exhibit D is hereby further amended by deleting May 1, 2018 and substituting July 1, 2021 in lieu thereof.
Section 3.C. of Exhibit D is hereby further amended by deleting the last sentence of the first paragraph and substituting the following in lieu thereof:
The Third Expansion Occupancy Date shall be no earlier than January 1, 2022 and no later than January 1, 2023.
5. Waiver of Right of First Offer as to Current Vacant Suite 200 in the Building. As of the date hereof, Tenant agrees and acknowledges that pursuant to the terms and conditions of the Lease, Landlord has offered Suite 200 (consisting of approximately 145,965 rentable square feet as more particularly shown on Exhibit O attached hereto) to Tenant for lease and Tenant has declined to exercise its Right of First Offer with respect to such portion of the Offer Space. Accordingly, Landlord is free to lease such vacant Suite 200 to a third party (including Scentsy, Inc.) and Landlord shall not be required to offer Suite 200 to Tenant again until such third partys lease has expired or terminated
(taking into account all of such third partys renewal or extension rights) and the space is vacant and available again.
6. Contingency. This Fourth Amendment is contingent upon the execution of a lease between Landlord and Scentsy, Inc., which shall be on terms satisfactory to Landlord, in its sole and absolute discretion. In the event this contingency is not satisfied within sixty (60) days following the execution of this Fourth Amendment, upon written notice from Landlord no later than fifteen (15) days after the expiration of such sixty (60) day period, this Fourth Amendment shall be void and of no further force or effect.
7. Security Deposit Reduction. Landlord hereby affirms that Tenant has requested the reduction of Tenants cash Security Deposit subject to the satisfaction of the Conditions specified in Article 4 (as amended). Upon the confirmation by Landlord that the Conditions in Article 4 (as amended) have been satisfied as required therein, Landlord agrees to reduce Tenants One Hundred Thousand and No/100 Dollars ($100,000.00) cash Security Deposit by Fifty Thousand and No/100 Dollars ($50,000.00) and deliver to Tenant Fifty Thousand and No/100 ($50,000.00) of Tenants cash Security Deposit within thirty (30) days of the satisfaction of such Conditions. The parties agree that upon such reduction of the cash Security Deposit, Landlord shall be holding a total remaining cash Security Deposit of Fifty Thousand and No/100 Dollars ($50,000.00). All other provisions of Article 4 remain in full force and effect.
8. Ruby Road Park. Section 10 of Exhibit D is hereby deleted in its entirety.
9. Incorporation. Except as expressly modified by this Fourth Amendment, all provisions, terms and conditions of the Lease shall remain in full force and effect.
10. Conflict. In the event a provision of this Fourth Amendment conflicts with a provision of the Lease, this Fourth Amendment shall supersede and control.
11. Definitions. All terms and phrases used herein shall have the same meaning as assigned to them in the Lease.
12. Examination of this Amendment. This Fourth Amendment shall not be of any legal effect or consequence unless signed by Landlord and Tenant, and once signed by Landlord and Tenant it shall be binding upon and inure to the benefit of Landlord, Tenant, and their respective legal representatives, successors and assigns.
13. Choice of Law. This Fourth Amendment has been executed and shall be construed under the laws of the State of Texas.
[SIGNATURES CONTAINED ON FOLLOWING PAGE]
IN WITNESS WHEREOF, the undersigned have caused this Fourth Amendment to be executed under seal and delivered as of the day and year first above written.
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LANDLORD: | ||||||
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DUKE SECURED FINANCING 2009-1ALZ, LLC, a Delaware limited liability company | ||||||
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By: |
Duke Realty Limited Partnership, an Indiana limited partnership authorized to do business in the State of Texas under the name Duke Indiana Realty Limited Partnership, sole member and manager | |||||
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Duke Realty Corporation, an Indiana corporation an Indiana corporation authorized to do business in the State of Texas under the name Indiana Duke Realty Corporation, General Partner | ||||
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By: |
/s/ Jeff D. Thornton | |||
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Jeff D. Thornton | ||||
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Senior Vice President | ||||
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Dated: |
8/24/11 |
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TENANT: | ||||||
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THE CONTAINER STORE, INC., | ||||||
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a Texas corporation | ||||||
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By: |
/s/ Valerie Richardson | |||||
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Name: |
Valerie Richardson | |||||
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Title: |
Vice President | |||||
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Dated: |
8/24/11 |
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The Container Store Group, Inc.
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Entity |
Jurisdiction of organization |
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The Container Store, Inc | Texas | |
The Container Store Services, LLC |
Texas |
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TCS Gift Card Services, LLC |
Virginia |
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Elfa International AB |
Sweden |
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Kirena OY |
Finland |
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Elfa Deutschland GmbH |
Germany |
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Elfa Sweden AB |
Sweden |
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PEKODOM GmbH |
Germany |
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Luminator AB |
Sweden |
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Elfa Lumi AB |
Sweden |
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Elfa Lumi A/S |
Denmark |
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Elfa Polska Sp. Zo.o |
Poland |
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Elfa Norg A/S |
Norway |
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Elfa France SA |
France |
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Elfa Manufacturing Poland Zo.o |
Poland |
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OY Elfa Finland |
Finland |
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Elfa Eiendom A/S |
Norway |
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QE9